07/22/09

=DJ IBM, Moving Into Cloud Computing, Beefs Up Networking Offering

   By Jessica Hodgson

   Of DOW JONES NEWSWIRES

SAN FRANCISCO (Dow Jones)--International Business Machines Corp. (IBM) said Wednesday it plans to start selling networking products made by Juniper Networks Inc. (JNPR) in a move that underscores the company's efforts to broaden its technology portfolio as it pushes into cloud computing services.

The deal, in which IBM will sell products from Sunnyvale, Calif.-based Juniper under its own name, builds on similar relationships IBM has with other networking companies. The Armonk, N.Y.-based technology giant already resells networking equipment from Cisco Systems Inc. (CSCO), the world's largest networking equipment company and Brocade Communication Systems Inc. (BRCD), another networking product maker.

Cisco, Juniper and Brocade all make routers and switches, used to "network" computers together, as well as direct information and data over the Internet.

IBM's deal comes amid growing interest in "cloud computing," the concept of selling computing services that are accessed online and paid for on a metered basis. Cloud computing is shaking up the technology sector - Microsoft Corp. (MSFT) and Google Inc. (GOOG) have launched products to establish themselves in the field - and several big technology vendors are seeking to augment their portfolios with products which can better serve the cloud computing platform.

IBM has traditionally resold some networking equipment made by companies such as Juniper and Cisco, through its massive technology services unit. But with many customers' networking infrastructure ill-equipped for cloud computing, it needs more flexibility in the products it can offer, Robert Whiteley, a research vice president at Forrester Research, said.

"Networking is the big bottleneck in cloud computing," Whiteley said. "To be able to offer breadth and depth in services, IBM needs some networking tools in its own portfolio."

IBM isn't alone. In recent months, several big technology vendors have moved into adjacent product areas either through organic development or acquisitions - moves that could change the market share landscape and rules of engagement.

In particular, Hewlett-Packard Co. (HPQ), IBM's biggest rival in the hardware and IT services market, has been beefing up its ProCurve networking division and is starting to compete more aggressively with Cisco and others.

Cisco, for its part, recently announced its intention to start making servers, bringing it ultimately into more direct competition with IBM, while Oracle Corp. (ORCL), the database and software giant, also recently moved into the hardware business through its acquisition of Sun Microsystems Inc.

Forrester's Whiteley said cloud computing, which allows customers more flexibility in the technology kit they buy, is forcing vendors to diversify in order to "grab more wallet share."

-By Jessica Hodgson, Dow Jones Newswires; 415-439-6455; jessica.hodgson@dowjones.com

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