back to article Why Cisco should merge with Dell

Cisco Systems has unleashed a world of hurt on its shareholders, masquerading as a consumer company that sells Flip phones, Umi telepresence, and Linksys routers. There's nothing wrong with selling gadgets to consumers. Apple does it brilliantly, and profitably. But Cisco isn't Apple. In a sense, Apple might be a place where …


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  1. jake Silver badge

    Yeah, but ...

    Disco STILL sucks!

    And just to rain on your parade, may I point out that clouds are still wet?

  2. Anonymous Coward
    Thumb Down

    I nearly choked on my coffee here

    Cisco lives and dies by its R&D. Its stuff is its own. It researches it, designs it, develops it and builds it. All the way from silicon to the actual processes you use to run the gear. There is a high-touch sales model, operational model, training business, etc which all cascade from there.

    Dell is a shop-n-ship boxing outfit. It bundles and rebadges kit from off the shelf suppliers and does zero in-depth R&D to speak of on any of it.

    There is no way you can merge those two. This idea is beyond stupid.

    1. DrXym Silver badge

      Dell does R&D

      Virtually all Dell kit is proprietary to some degree. Custom cases, boards, firmware etc. It might not be to the same level as Cisco but it does do it.

    2. This post has been deleted by a moderator

      1. Anonymous Coward


        Dell servers were resepected? When was that??? They've always been cheap tat masquerading as 'enterprise class'. Anyone who thinks otherwise has clearly never had the misfortune of supporting them or dealing with their dreadful support staff.

        1. This post has been deleted by a moderator

          1. Anonymous Coward
            Anonymous Coward


            Sorry, but I disagree. Firstly I started in IT in 1986 as a mainframe operator, and no, I'm not old enough to suffering from amnesia. Back in the late 90's we had a mix of HP DL's and Dell Power Edges that were bought in to replace ageing propriatory UNIX servers. Comparing the two is chalk and cheese. The HP's were well designed and easy to work on. The Dell's were just components stuffed into a chassis. The Dell servers simply weren't a patch on the HP servers. Rack mounting kits, KVM's - the whole package was simply worlds apart. We paid a premium for the HP servers over the Dells, but frankly it was money well spent. Heard recently that the bloke that designed the HP's is now at Dell.

            1. This post has been deleted by a moderator

          2. Anonymous Coward

            Re: Respected??

            Alright, I've got to ask: who makes 'good' servers these days? Where good is (my personal definition): built solidly, have field-replaceable components, don't slice your fingers up on bare metal when you pop the lid, made by people who understand that some of us have 19" racks (oo-er) and some have 23". Bonus points if they come in AC and DC power models.

            Got some names? Dell used to be half decent (well, not compared to my much-loved and still-missed Sun 220Rs and E450s, but good enough), but not now.

  3. Jon Massey

    Dell R&D

    You could argue that their DCS systems are pretty innovative

  4. Anonymous Coward
    Anonymous Coward

    Re: I nearly choked on my coffee here

    While I agree with you on the nature of the businesses (Cisco do R&D heavy, high touch sales/support, fat margins...) versus Dell (commodity items with little R&D, price-driven sales and low margins), high-end switching is becoming a commodity market place and it is hurting Cisco.

    Combined with the drive towards cloud computing (i.e. the big orders are coming from the cloud providers as the cloud providers win business from Cisco's traditional enterprise markets), Cisco have to be able to compete with Juniper/Brocade rather than worry about printer ink manufacturers who may never actually become a serious threat.

    So, do Cisco try and pretend that they can offer high-end switching products at 2-3x the price of competitors while offering less performance or do they buy in a company that knows how to do commodity products and start joining the commodity pricing model for hardware and leverage their software features/support to provide the value?

    Plus Linksys+Dell makes more sense than selling Linksys for a loss...

  5. Adam 73

    Re: Re: I nearly choked on my coffee here

    Actually the drive towards cloud computing/convergance will push all one trick pony companies out of that market (thats Juniper/Brocade/EMC/Netapps you name it). The converged stacks will dominate the enterprise space eventually and those companies building big clouds (truly big 100,000+servers) will buy cheap and cheerful servers and stack em high (which is why Dell DCS has done well) and they do not use current enterprise tin because it just doesnt have the scalability model.

    Thats the reason Cicso moved themselves into the server space, they saw the end was coming. Problem is they lack the experiance (IP), know how and more importantly volumes to compete at the moment, Dell might give them 2 out of 3. Time is running out though, we may have another Sun situation.

    Biggest problem Cisco have is that their business model is all wrong. It has been built on arrogance (look at their attempt to enter the FC space) and high margins, not easy to change a business like that.

    Also they do not do proper research, they like most companies just develop (just because they design out of date ASICS does not mean they research (they still use 90nm FFS)). The only two IT companies that do pure research (stuff that genuinely changes the game) are IBM and HP as you will find if you go through their list of patents.

    Its that printer "ink manufacturer" who is the threat (thats currently handing Cisco its ar*e on a plate according to market share figures) as they not only have the IP but also the economies of scale that are required. Remember that storage is going the same way, doesnt matter how innovative companies are cheap is cheap!

    1. Anonymous Coward
      Thumb Up


      There are some really good points here.

      In the server business, the margins are bad, OS money goes to MS or RHEL, or in the big clusters that run CentOS -to nobody. CPU money goes to Intel or AMD (maybe soon ARM suppliers), CUDA GPUs to Nvidia and the rest of the business: mainboards, DRAM, HDD are low margin worlds where volume is needed to drive down prices and make money. Cisco don't have the volume, and are left with the same problem that Sun had: x86 is a cut throat business.

      Dell and HP know this, they see the margins in networking and EMC-class storage and say "we can undercut this". Not by competing head to head, but by changing the rules. No to SANs, yes to Hadoop-style DFS. No to HA hardware, yes to computing infrastructures that handle failures at the app level. No to being part of the datacentre, yet to supplying the entire rack.

      We're moving back to a world of mainframes, but instead of a single mainframe, now the computer is a set of racks, with the servers, the network and the application layers designed for this.

      That said, you can't pretend that the machines in the rack don't have TCP, the network people need to be involved, and if the cluster team go and buy some switch that claims to be datacentre app ready (e.g. Arista-style), the network people will blow up because they like to manage everything with an IP Address, through tools they know and use. Whatever goes into the datacentre needs to meet these people's needs, which is management, capabilities and side effects (i.e. a Hadoop cluster can unintentionally take down the rest of a companies network through DNS lookups alone)

  6. TeeCee Gold badge


    I suppose that Disco servers would use Cell processors......

    1. J. R. Hartley
      Thumb Up

      I like what you did there

      The post is required, and must contain letters.

  7. Glen Turner 666

    So, who's going to sell their Red Hat shares to Cisco? Anyone?

    The problem with "let's buy Red Hat" is that you have to find a seller of those Red Hat shares. No one in their right mind is going to swap Red Hat shares for Cisco shares. You might take an enormous bundle of cash for your Red Hat shares, but if you're an investment company then you've got a problem, because what you'd really like to do with that cash is reinvest it, and you want to be heavy in Red Hat shares, not light, so your swap is still counterproductive.

    BTW, the AC the posted that Cisco do bespoke engineering, and thus their culture is at odds with Dell's culture has a point. The problem is that firms like Arista have shown that Cisco's bespoke engineering can be bested using off-the-shelf parts; and so it might be that Dell's culture of building kit from COTS parts is the new winning culture , and not Cisco's current culture.

  8. Anonymous Coward

    I'm only in favor of this merger....

    If the merged company really does call itself "Disco" :)

    Other than that, you get a banged up merging of computing, services, some storage and netoworking. I dont think its a good idea for Cisco to do that. It alienates lots of important integrators and consultants that are important channels to move networking gear.

    Flame icon, for the Disco Inferno....

  9. John Smith 19 Gold badge

    *everything* becomes commoditised in time.

    That's a basic part of marketing 101.

    Knowledge diffuses outward. In tech yesterdays 5-guys-in-the-world-can-do-this becomes tomorrows $9.99 @ Kmart retail sensation. If it's any good.

    What allows *some* companies to keep charging that premium price is either they drive product changes (newer *is* better, or at least incompatible with older) *or* they have a brand people *expect* will give them something over and above the same basic capabilities elsewhere.

    What's that worth? Multiple Apple's price premium (over other PMP's prices) by how many they sold.

    Would Dell/Cisco be a "premium" brand? time will tell.

  10. Anonymous Coward
    Anonymous Coward

    Dell and Research/Design

    It's a shame that so many of you feel Dell doesn't do research, or even build it's own servers, I understand why, but it's simply not the case(excuse the pun) anymore. I wasn't sure what I'd find when I jumped ship from IBM to come to Dell, but what I found was a dedicated and skilled hardware team who design the motherboards, the interconnects, how the components interact, drive standards adoption, and design hardware packaging, placement, cooling and some innovative features into the servers in both hardware and management.

    Yes, the servers are assembled with a lot of industry standard parts, but the way the design is pure Dell, the layout is Dell and we drive the component manufacturers to innovate to meet our specifications. And yes, many are assembled outside of a Dell owned fascility. This isn't your fathers Dell though...

    I'm sure all those commenting have prior experience, but we are a different company today, working hard to deliver on some key technology innovations. Our DCS, PowerEdge-C servers are 2nd to none in the cloud server space, we've also got some great servers optimized for the enterprise and virtualization space including the R910 and the PowerEdge AMD based R815, being two of my favorites. We are doing the same thing in some key industry verticals and software segments, in order to help drive down industry prices and keep competition open.

    Less you think this was really an anonymous post by some bland marketing or PR person, it wasn't. I'm Mark Cathcart, one of Dells Distinguished Engineers and Director of Systems Engineering. and no, I didn't get this comment approved or proof read before I posted it.

    You can find my blog with an email address at with an email address if you have specific problems or concerns about anything I've written.

    My commenting on this artical doesn't reflect any personal or business support or endorsement of the views expressed, I was just attracted by the concept of working at a Disco again, its been 36-years since the last time ;-)

    1. Anonymous Coward
      Anonymous Coward

      Re: Dell R&D spending

      Here's a 2009 chart of R&D spending:

      HP and Apple spend around double the amount Dell does as a % of revenue

      Cisco/MS/Google spend a more than five times the amount Dell does as a % of revenue

      Am I missing something or does Intel's R&D spend count as part of Dell's R&D?

      If you have more recent numbers, feel free to add them.

      1. Matt Bryant Silver badge

        RE: Re: Dell R&D spending

        Whilst a nice graph, you have to put things in context. In Dell's defence, you could point out that Dell does not operate in as many areas as hp or IBM (IIRC, both hp and IBM do lots of really expensive, high-tech R&D into nano-materials and the like, and I'm betting few companies match hp for R&D on ink technologies), so it is unlikley to spend as much on R&D overall, but might be spending just as much as hp or IBM in a particular field. I'd prefer to see a chart of R&D spend in server and storage technologies over a space of ten years, to see if the trend of R&D investment is rising or falling in particular areas, otherwise you could get a year with a spike due to a new product range being introduced (think of the amount Apple would have spent on the original iPhone, which would have been an overall additional R&D spend, but probably had a negative impact on R&D spending in certain other areas).

        I can also remember a period when Dell servers were at least acceptable (and I have high standards), and in some areas superior to the competition (we used to hate the hp cable arms and wished they could be more like Dell's neat designs).

        CISCO has had a problem for years in that the old monopoly that allowed them to rake in fat margins is under serious attack. They used to be able to maintain an advantage (and therefore margins) by offering vastly superior kit to the competition, but now that advantage has been seriously eroded and people have dared to try cheaper options rather than pay the CISCO tax. Whilst not fatal to CISCO - they're still making plenty of cash - it is fatal in the eyes of Wall Street which demands growth rather than reality, hence the desperate attempts by CISCO to branch out. Problem is they may have left it too late, and it may require a merger with someone like Dell to give them viable width. Sun left it too late and diversified badly, which probably opened a few eyes at CISCO and Dell.

    2. jake Silver badge

      @AC 22:36

      Enjoy your marketing. And your "fascility". Me, personally, I don't need bells & whistles & disco lights ... I much prefer quietly functional blinkenlights. The rest of the hardware sings it's own song ... and provides it's own smells, for that matter ;-)

      Probably a good thing you are posting anonymously ... Plausible denial is, unfortunately, a plus in the modern Fortune 1000 job ladder ... And I'm not at all surprised that whoever you are didn't post a personal link back to Dell.

      1. Anonymous Coward
        Anonymous Coward

        Plausible, possibly, denial, no.

        It's not plausible denial, I just didn't want the personal email address linked to my long standing el reg account to be linked to the comment.

        And yeah, I typed the update in a rush just before heading home for the day... I apologize for the typo's... I'll post a "corrected" version of the el reg comment to my personal blog as listed in my original comment. Ring my bell?

  11. WinHatter

    And what would be the name ???

    Ciscell (pronounced Sesquel)

  12. John Smith 19 Gold badge

    But what happens if the merger goes horribly wrong?

    The company crashes

    It's assets sold at rock bottom prices.

    It's more than a fire sale.

    It's a disco inferno.

  13. M. B.

    Doesn't make sense...

    Cisco provides network and server parts of the "stack", but no storage. If they want to round out and stabilize their position, they would be better off buying a dedicated storage provider like NetApp, rolling it into their stack, and selling it as a preconfigured unit (you can already sorta do that with the FlexPod). That would give the Cisco server products much better visibility and a nicely performing storage component to their business.

    Dell has storage products and server products (we moved to all Dell servers from mixed IBM-HP-Dell and got better service and less failures, so clearly people's mileage may vary), but their PowerConect networking lineup has some holes in it. From what I understand, they work closely with Brocade, so that would be a good option for Dell to pursue to round out that lineup.

    But Cisco buying or merging with Dell? That just doesn't make a whole lot of sense. Way too much overlap. Does Cisco stop selling their servers? Clearly Dell would drop it's networking component (which is quite popular with smaller shops who get those pieces bundled in with other infrastructure bits). What about Cisco storage partnerships with EMC and NetApp? Clearly they'll both be butthurt about EqualLogic and Compellent being the new preferred choice.

    I can't see it happening.

  14. John 62

    Is Cisco the new Nortel?

    Does my memory trick me, or did the Register once recommend Nortel should merge with HP?

    Does this mean Cisco isn't far from becoming Nortel?

    1. Anonymous Coward
      Anonymous Coward

      Re: Is Cisco the new Nortel?

      Your memory is good but not that good -

      We merely pointed out that HP could buy "weakened players" such as Nortel.

  15. Anonymous Coward
    Anonymous Coward

    Cisco Tax?

    Why would consumers want to start paying the Cisco tax?

  16. Anonymous Coward

    Memo to CEO of a company that wants to be bought out

    boost your Cash in the Bank total.

    If you don't want to be taken over make it as small as possible.

    IMHO both Dell & Cisco are vunerable to take overs. Both (according to the article) have more than $6B in the bank.

    Why are'nt the shareholders rising up and asking "What is that cash doing? Either return it to us by way of a dividend, buy a whole shed load of your shares that raising the price or buy another company or two"

    They are making a miserly return on that money in the bank.

    Remember that the Cash in the bank total is subtracted from what you have to pay for the company. The result is the amount of cash/shares/long term debt you have to stump up. Once the takeover is done and dusted that cash in the bank is now yours. Use it to pay off some short term debt (3-9 months).

    This is how smaller companies can take over big ones with a lot of cash in the bank.

  17. John Smith 19 Gold badge
    Thumb Up


    Absolutely. Cash in bank is *just* what some corporate predator needs to pay off his crew (of bankers) for loaning him the green to buy out a company from under the existing management (plus a *little* bit left offer of course. Nothing excessive, just a $100m or so).

    Aren't US interest rates (for lenders) near an all time low?

    Buy something with it, fund something with it or just buy their own shares (which for *real* companies is a *very* bad use of the money) but don't leave it in a bank.

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