Cisco Invests $1B in Cloud Service - Analyst Blog

Cisco Systems, Inc. CSCO recently announced plans to invest $1 billion over the next two years to build the world's largest network facilitating cloud computing.

Cisco declared that it expects to partner with companies like online consultation provider WebEx, Australian service supplier Telstra, a large-scale technology provider, Ingram Micro and SAP, OnX Managed Services. Such collaborations would help it to build and support the Cisco Cloud Services network and expand its data centers. Cisco's new service will be sold to consumers directly as well as through channel associates.

The network will be based on the OpenStack IaaS infrastructure, to handle a significant amount of work on any virtual machine manager. It will enable interaction and interoperability between both private and public clouds. A virtual machine manager, which is a hardware virtualization system allowing several guest operating systems (OS) to work simultaneously on a single host system, will make this possible.

Since Internet-based services are catching on and companies need to be able to offer the same grade of services at a high level of security across their customer bases, a platform enabling interoperability is of utmost importance. This is the need Cisco aims to satisfy with this endeavor.

The Intercloud service will also take care of the security and quality of services to ensure the protection of user data from either professional or government-sponsored prying. The service will integrate real-time data analytics and application process interfaces (APIs) for swift application improvement.

However, Cisco faces tough competition from Amazon.com Inc.'s AMZN Amazon Web Services, Microsoft Corp's MSFT Azure and Google Inc.'s GOOG Cloud Platform.

Cisco, based in San Jose and founded in 1984, designs, produces and sells Internet protocol IP and other networking equipment to the information technology industry worldwide.

The networking giant is now focused on widening its horizon as it is facing softness in the global hardware market. Notably, the global hardware market has been affected by the recent commotion over the NSA's global Internet surveillance program, which impacted the company's results in the last quarter.

We believe that Cisco's Intercloud service can help to deliver a consistent standard of service at reasonable costs, thus boosting its revenues.

Currently, Cisco carries a Zacks Rank #3 (Hold).