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Why Did Cisco Partner with IBM?

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Cisco partners with IBM to leverage the fast-growing integrated infrastructure market

A few months back, Cisco (CSCO) and IBM (IBM) entered into a partnership under which Cisco’s Unified Computing System (or UCS) for data centers will combine with IBM’s Storwise V7000 storage system. These companies have named this integrated solution as VersaStack. Cisco’s UCS is a system that converges networking, storage, security, and applications into one infrastructure.

The motivation behind this partnership has come on the back of increasing demand for converged systems or the integrated infrastructure systems. This type of integrated infrastructure offers a cost-effective solution to Cisco’s customers. According to IDC, the worldwide integrated infrastructure market grew at a year-over-year rate of 42% in 3Q14.

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Past partnerships for Cisco have been successful

This isn’t the first time Cisco has entered into such a partnership. A few years back, Cisco entered into a joint venture with EMC (EMC) and VMware (VMW), popularly known as the VCE (VMware, Cisco, EMC). This joint venture was created with a vision of establishing a converged infrastructure for data center consolidation, IT-as-a-service, and the cloud computing market. VCE offers enterprise IT solutions using technologies from VMware’s computing, Cisco’s networking, and EMC’s storage.

Another major partnership that Cisco is involved in within the integrated infrastructure market is NetApp (NTAP). Cisco sells products under the name FlexPod in its partnership with NetApp, which is essentially a combination of Cisco’s UCS and NetApp’s FAS (fabric-attached storage) products.

These partnerships for Cisco have resulted in a success. This can be proved from a report from IDC, which mentions that VCE showed year-over-year revenue growth of 45.7% in 3Q14. Cisco–NetApp or FlexPod products showed a growth rate of 32%, while HP (HPQ) showed a healthy growth of 273%, as the chart above shows.

If you’re bullish about Cisco, you could invest in the iShares Dow Jones US Technology ETF (IYW). IYW invests about 4.1% of its holdings in Cisco.

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