Cisco, HP Clash over Networking Equipment Pricing

HP is looking to focus the debate around its networking equipment competition with Cisco around price. HP ProCurve officials say they are pleased about reports that Cisco may be asking some partners to match prices with HP. However, Cisco officials deny any such program is in place, saying instead that they are competing based on value and not price. If HP can keep the focus on price, it could help it gain ground against Cisco now that the global recession has put a tight squeeze on IT budgets.

The friction between Hewlett-Packard and Cisco Systems is continuing, this time in the area of networking equipment.

Specifically, the issue is the pricing of the networking equipment. HP officials are pointing to comments some Cisco officials made during the company's Partner Summit in June as an indication that Cisco is instituting a program urging partners to meet HP ProCurve prices.

Cisco officials are arguing that while they were vehement in the "refuse to lose" message they sent to attendees of the Partner Summit, they said that Cisco wasn't ready to get into any kind of price war with HP's ProCurve networking business.

"We talked about the need to work more effectively with our partners to ensure that we bring together all of the various elements that Cisco can bring to the table to win deals and solve customer problems," Wendy Bahr, senior vice president of U.S. and Canada channels for Cisco, said in a blog post that never mentions HP by name but talks about recent news reports around the issue. "We told our partners that together we should -refuse to lose,' but let me be clear: This does not mean that we will change our winning formula. We will be sensitive to price, but we will compete through value."

Cisco and HP always have had a relationship of both competition and cooperation, but that has been heightened in recent months, most notably with Cisco's introduction in March of its UCS (Unified Computing System), which marked Cisco's foray into the data center hardware business. Cisco's move reportedly strained relations with such vendors as HP and IBM, which combined spend billions of dollars a year on Cisco networking equipment.

Soon after, HP released its own all-in-one data center offering, called the BladeSystem Matrix, which like UCS combines server, storage, networking and management software in a single package. HP in June also took another swing at Cisco with its partnership with telecommunications equipment maker Alcatel-Lucent, a move that analysts said gives HP more ammunition in the areas of data centers and cloud computing.

In her blog, Bahr said Cisco's continued focus in dealing with partners and end users will be on value rather than price.

HP had a different take on the message. Karl Soderlund, vice president and general manager of sales and marketing for the Americas for HP ProCurve, said in an interview that Cisco is putting in place a program for partners to match HP ProCurve prices, and that it's an indication that HP ProCurve is making a dent in Cisco's market share.

"This is very much a positive," Soderlund said, adding that he expects it will encourage Cisco customers to take a look at HP ProCurve products. "We wish all Cisco customers out there know about it."

Soderlund's take was backed up by some reports in which Cisco resellers say a price-match program by Cisco is in the works. However, other partners said they haven't heard about such an initiative.

Either way, Dave Passmore, an analyst with the Burton Group, said he can understand why Cisco might be turning more of its attention to HP ProCurve, given that its rival is now No. 2 behind Cisco in the network market and is gaining ground.