Dell vs. Cisco: Networking Challenge?

Includes: CSCO, DELL, HPQ
by: Joe Panettieri

Dell challenging Cisco Systems in the networking market? That's quite a stretch. But the PC maker is quietly competing in two emerging markets, and the efforts could lead to a longer-term showdown between Dell (NASDAQ:DELL) and Cisco (NASDAQ:CSCO) -- particularly in small businesses.

In IP communications, Dell is now reselling so-called IP PBX phones from Fonality. Smart move, since Fonality supports the wildly popular Asterisk open source system.

And in the TelePresence market -- loosely described as next-generation video conferencing -- Dell is reselling equipment from LifeSize Communications. That's another smart move.

LifeSize is a small but fast-growing company that employs about 180 people -- up from 120 in January. Generally speaking, LifeSize's next-generation video conferencing systems serve small and midsize businesses, government, financial, education, and healthcare customers.

While TelePresence systems from Cisco Systems and Hewlett-Packard (NYSE:HPQ) can cost $250,000 or more per executive suite, LifeSize's solutions start at less than $5,000.

I am not suggesting that LifeSize's $5,000 solution is anything like the far more sophisticated offerings from Cisco and HP. However, aggressive pricing and entry-level solutions will certainly help to grow the overall market for TelePresence, as I pointed out last year.

Seeing the Bigger Picture

That's where Dell enters the picture. The PC giant has signed on to resell LifeSize's equipment, notes Dan Sibille, the head of partner channels for LifeSize.

Dell's move is particularly interesting, since the company typically does not promote bleeding-edge technology. Instead, Dell waits on the sidelines for a technology to reach critical mass, and then jumps into an industry to cash in on volume sales.

Apparently, Dell's mass market strategy is evolving. In addition to promoting open source IP PBXes (from Fonality) and TelePresence from LifeSize, Dell also offers consumer PCs with Ubuntu Linux preinstalled.

By partnering with niche companies, Dell is able to test emerging markets right when they seem to be nearing their tipping point. TelePresence is the latest example of that strategy.

These moves may not pay immediate dividends, but the will certainly help Dell to find emerging markets far outside of the traditional PC industry.

And Dell could wind up competing with a range of companies -- including Cisco -- each time it strays from PC sales.

Disclosure: No position.

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