I met recently with Cisco’s UCS group in San Jose to get a quick update on sales and maybe some hints about future development. The overall picture is one of rapid growth decoupled from whatever pressures Cisco management has cautioned about in other areas of the business.
Overall, according to recent disclosure by Cisco CEO John Chambers, Cisco’s UCS revenue is growing at a 550% Y/Y growth rate, with the most recent quarterly revenues indicating a $500M run rate (we make that out as about $125M quarterly revenue). This figure does not seem to include the over 4,000 blades used by Cisco IT, nor does it include units being consumed internally by Cisco and subsequently shipped to customers as part of appliances or other Cisco products. Also of note is the fact that it is fiscal Q1 for Cisco, traditionally its weakest quarter, although with an annual growth rate in excess of 500% we would expect that UCS sequential quarters will be marching to a totally different drummer than the overall company numbers.
I have been working on a research document, to be published this quarter, on the impact of 8-socket x86 servers based on Intel’s new Xeon 7500 CPU. In a nutshell, these systems have the performance of the best-of-breed RISC/UNIX systems of three years ago, at a substantially better price, and their overall performance improvement trajectory has been steeper than competing technologies for the past decade.
This is probably not shocking news and is not the subject of this current post, although I would encourage you to read it when it is finally published. During the course of researching this document I spent time trying to prove or disprove my thesis that x86 system performance solidly overlapped that of RISC/UNIX with available benchmark results. The process highlighted for me the limitations of using standardized benchmarks for performance comparisons. There are now so many benchmarks available that system vendors are only performing each benchmark on selected subsets of their product lines, if at all. Additionally, most benchmarks suffer from several common flaws:
They are results from high-end configurations, in many cases far beyond the norm for any normal use cases, but results cannot be interpolated to smaller, more realistic configurations.
They are often the result of teams of very smart experts tuning the system configurations, application and system software parameters for optimal results. For a large benchmark such as SAP or TPC, it is probably reasonable to assume that there are over 1,000 variables involved in the tuning effort. This makes the results very much like EPA mileage figures — the consumer is guaranteed not to exceed these numbers.
Fujitsu? Who? I recently attended Fujitsu’s global analyst conference in Boston, which gave me an opportunity to check in with the best kept secret in the North American market. Even Fujitsu execs admit that many people in this largest of IT markets think that Fujitsu has something to do with film, and few of us have ever seen a Fujitsu system installed in the US unless it was a POS system.
So what is the management of this global $50 Billion information and communications technology company, with a competitive portfolio of client, server and storage products and a global service and integration capability, going to do about its lack of presence in the world’s largest IT market? In a word, invest. Fujitsu’s management, judging from their history and what they have disclosed of their plans, intends to invest in the US over the next three to four years to consolidate their estimated $3 Billion in N. American business into a more manageable (simpler) set of operating companies, and to double down on hiring and selling into the N. American market. The fact that they have given themselves multiple years to do so is very indicative of what I have always thought of as Fujitsu’s greatest strength and one of their major weaknesses – they operate on Japanese time, so to speak. For an American company to undertake to build a presence over multiple years with seeming disregard for quarterly earnings would be almost unheard of, so Fujitsu’s management gets major kudos for that. On the other hand, years of observing them from a distance also leads me to believe that their approach to solving problems inherently lacks the sense of urgency of some of their competitors.
Today, Barnes & Noble announced the release of NOOKcolor--beating Amazon to the punch of releasing a color eReader that's really a multimedia tablet. Billed as "the reader's tablet" by B&N, the 7-inch device has an LCD screen, weighs less than 1lb., and runs on Android. Though it won't connect to the Android Marketplace, it will run reading-specific apps as well as games like Sudoku and eventually Netflix. At $249, the NOOKcolor fits comfortably in the price range of dedicated eReaders, but it's half the starting price of the iPad--which raises the question, will consumers be comparing the two products? I think they will, especially if they are a current B&N customer or if they want a device primarily for reading that also has other media consumption and Web browsing capabilities. If reading is secondary to accessing other media and the broad Apple or Android app ecosystems, consumers will be better off with a more multifunctional tablet like the iPad or future devices from RIM, Samsung, and others.
Earlier this week, HP quietly released the Slate 500, an 8.9-inch tablet running Windows 7 that's marketed exclusively to businesses. According to HP, 400 customers are currently evaluating the device, which will be sold through HP's direct sales force and through its Web site for SMBs. The Slate 500 is literally just Windows 7 on a slate form factor; the idea is that businesses that run their systems on Windows 7 will be able to use the Slate for enterprise applications (the device doesn't sync with a user's HP PC).
Yesterday, Apple announced that it had sold 4.19M iPads in its fiscal Q4 2010, up from 3.27M in Q3. That means it sold more iPads than Macs in Q4, even though quarterly Mac sales were the highest they've ever been: 3.89M, a 27% unit sales increase from the year-ago quarter. Given that calendar Q4 sales typically account for 35%-40% of consumer electronics sales, we could be looking at 15M+ iPads sold globally for Apple in its first, three-quarter year. I am not the only analyst saying "Wow" right now.
There were tons of interesting tidbits in Apple's earnings call yesterday but I want to focus on a two points that I know are plaguing product strategists in this area. In particular, Steve Jobs attacked:
There has been a lot of press about IBM’s acquisition of BNT (Blade Network Technologies) focusing on the economics and market share of BNT as a competitor to Cisco and HP’s ProCurve/3Com franchise. But at its heart the acquisition is more about defending and expanding a position in the emerging converged server, networking, and storage infrastructure segment than it is about raw switch port market share. It is also a powerful vindication of the proposition that infrastructure convergence is driving major realignment in the vendor industry.
Starting with HP’s success with its c-Class blade servers and Virtual Connect technology, and escalating with Cisco’s entrance into the server market, IBM continued its investment in its Virtual Fabric and Open Fabric Manager technology, heavily leveraging BNT’s switch platforms. At some point it became clear that BNT was a critical element of IBM’s convergence strategy, with IBM’s plans now heavily dependent on a vendor with whom they had an excellent, but non-exclusive relationship, and one whose acquisition by another player could severely compromise their product plans. Hence the acquisition. Now that it owns BNT, IBM can capitalize on its excellent edge network technology for further development of its converged infrastructure strategy without hesitation about further leveraging BNT’s technology.
I recently spent a day with IBM’s x86 team, primarily to get back up to speed on their entire x86 product line, and partially to realign my views of them after spending almost five years as a direct competitor. All in all, time well spent, with some key takeaways:
IBM has fixed some major structural problems with the entire x86 program and it perception in the company – As recently as two years ago, it appeared to the outside world that IBM was not really serious about x86 servers. Between licensing its low-end server designs to Lenovo (although IBM continued to sell its own versions) and an apparent retreat to the upper-end of the segment, it appeared that IBM was not serious about x86 severs. New management, new alignment with sales, and a higher internal profile for x86 seems to have moved the division back into IBM’s mainstream.
Increased investment – It looks like IBM significantly ramped up investments in x86 products about three years ago. The result has been a relatively steady flow of new products into the marketplace, some of which, such as the HS22 blade, significantly reversed deficits versus equivalent HP products. Others followed in high-end servers, virtualization and systems management, and increased velocity of innovation in low-end systems.
Established leadership in new niches such as dense modular server deployments – IBM’s iDataplex, while representing a small footprint in terms of their total volume, gave them immediate visibility as an innovator in the rapidly growing niche for hyper scale dense deployments. Along the way, IBM has also apparently become the leader in GPU deployments as well, another low-volume but high-visibility niche.
As September closes and the holiday shopping season approaches, we expect near-daily developments in the burgeoning tablet market, and this week didn't disappoint. Here's our take on the headlines that caught our eye this week:
Historically, the positioning of Dell versus its two major competitors for high-value enterprise business, particularly where it involved complex services and the ability to deliver deeply integrated infrastructure and management stacks, has been as sort of an also ran. Competitors looked at Dell as a price spoiler and a channel for standard storage and networking offerings from its partners, not as a potential threat to the high-ground of being able to deliver complex integrated infrastructure solutions.
This comforting image of Dell as being a glorified box pusher appears to be coming to an end. When my colleague Andrew Reichman recently wrote about Dell’s attempted acquisition of 3Par, it made me take another look at Dell’s recent pattern of investments and the series of announcements they have made around delivering integrated infrastructure with a message and solution offering that looks like it is aimed squarely at HP and IBM's Virtual Fabric.
I spoke last week at The Big Money’s Untethered 2010 conference in NYC. I couldn’t stay for the whole event, but I really enjoyed seeing Phil McKinney, CTO of the Personal Systems Group at HP, interviewed by James Ledbetter. He wowed the audience with a little show-and-tell: a flexible screen display printed on a mylar scroll that’s bi-stable (meaning that, like an E Ink screen, it can use very little power to display text) but can also display video at 60 hertz.
[Photo courtesy of ZDNet UK (not from Untethered, but it’s the same demo)]
According to McKinney, we’re about 24 to 36 months away from seeing this display make it into products on the market. Imagine walls papered with the stuff, furniture covered with it. Your “device” would be your portable connectivity, which would trigger your data to appear on one of these screens in your home, office, or public space as you approach. I’m envisioning something that looks like the world in “Splinter Cell,” which my gamer husband has been playing on our Xbox 360: