Intel Romley slowing sales of Cisco UCS?

Customers may be pausing to consider new server platform, Wall Street firm notes

While Interop is in full swing next week, Cisco will announce its fiscal 2012 third quarter earnings on Wednesday, May 9. At least one analyst expects Cisco to hit its targets, based on 35 interviews with channel partners in the US and Europe.

Oppenheimer & Co. says the Cisco channel notes improving demand for switching and security products and a solid pipeline building for Q4, which ends in July. Demand is balanced across the US and Europe, Oppenheimer reports.

The firm is looking for progress in data center switching but notes that the recent introduction of Intel's Xeon E5-based "Romley" servers may prompt a pause in sales of Cisco's UCS server. Cisco announced its own Xeon E5-based UCS servers two months ago.

But as customers evaluate the new offerings from both Intel's OEMs and from Cisco, UCS volumes could slow near term, Oppenheimer notes.  The firm expects UCS momentum to rebuild in the second half of 2012 after customers complete their qualification process on the new servers.

The solid pipeline building for July, meanwhile, could indicate that Cisco might boost its Q4 guidance slightly, Oppenheimer notes. The firm's view is reinforced by the recent guidance issued by IBM and EMC. Vendors usually do a full court press on sales as well during the end of the fiscal year to boost numbers, which could also raise guidance a bit.

That said, Oppenheimer says Cisco could report another sequential decline in gross profit margin next week based on product mix. Sales of lower margin UCS and set-top boxes may have outstripped sales of higher-margin core routing and switching, pushing last quarter's low point of 60.9% even lower for Q3. This may have offset margin improvements in the core networking gear, the firm notes.

Separately, Forbes has an interesting post - contributed by the CEO of an online conferencing and telepresence company - on five reasons why Cisco and Polycom are "in trouble" in telepresence. The five reasons are cost, cloud, mobile, interoperability and collaboration capabilities all being delivered by upstart companies -- even though Cisco, for example, announced its own mobile collaboration tool in March.

In the post, FuzeBox CEO Jeff Cavins argues that the hundreds of thousands to millions of dollars spent on dedicated telepresence rooms in enterprises have become the "private jet" of these organizations - a gratuitous and costly luxury more than a necessary productivity investment. He argues that companies could save 90% of their investment in these telepresence rooms by opting for products that offer similar quality video at one-tenth of the cost.

Cavins goes on to claim that advances in cloud-based conferencing accessible from mobile devices, combined with gateways for interoperability between different conferencing systems, and real-time sharing and annotation of documents, graphics, audio and images, will make the dedicated telepresence room "feel Jurassic." Cisco recently raised the interoperability flag when it appealed the European Commission's approval of the Microsoft/Skype merger.

FuzeBox is one of these telepresence upstarts looking to disrupt the incumbency of Cisco, Polycom and LogiTech/LifeSize, so consider the source. Then again, why would any company opt for a private jet when flying coach could free up funds to invest in the core business?

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