HP Ratchets Up Ethernet Price War

Hewlett-Packard Co. (NYSE: HPQ), which is best known as a systems vendor, added some flesh to the bones of its long-term networking strategy this week (see HP Expands Switch Family).

It may not exactly be the news that other players in the enterprise networking market are looking for: HP is stressing lower prices in its mission to get a bigger slice of the market.

The firms approach appears to be a fairly simple one: Focus on the network edge and attempt to undercut the competition. Last month, for example, HP went after market leader Cisco Systems Inc. (Nasdaq: CSCO) with its 3400cl switch; and it's got big plans for the networking technology it acquired from Riverstone Networks Inc. (OTC: RSTN.PK) earlier this year (see HP Gears Up for Switch Price War and HP Switch Deal Good for Users).

HP is using its ProCurve switch line to entice users to its Adaptive Edge strategy. This means that devices on the network edge handle the likes of authentication, routing, and traffic management, as opposed to products at the network core.

Up until now, HP has kept its long-term plans for enterprise networking strategy under wraps. But the company told NDCF that products based on Riverstone’s XGS switch technology will be available in mid-2005. Essentially, these will be stripped down routing switches, providing a high-speed interconnect between devices situated on the edge.And the big benefit for users? Cost, according to Mark Thompson, worldwide sales and marketing manager for HP’s ProCurve Networking division. Although he is unwilling to divulge specifics, Thompson confirms that the new devices will be 30 to 50 percent less expensive than a traditional core product.

Somewhat confusingly for products sitting at the network core, HP describes these boxes as "Edge Fabric" devices. Nonetheless, Max Flisi, research analyst at IDC, believes that the Adaptive Edge concept makes sense. “The idea that the intelligence is at the edge of the network and the core just moves traffic is a sensible one,” he says.

”A lot of the interesting stuff is happening at the edge of the network, such as wireless LAN access points and security vulnerabilities, so that’s where you need a lot of the intelligence."

But a bigger questions about all this stuff may come on the investment front: Does another aggressive enterprise networking vendor mean more pricing pressure in an already cutthroat market?

The answer is that this is very likely, considering the price cuts HP is talking about. Not only is HP targeting Cisco with the 3400cl, it's also going after rival switch vendor Foundry Networks Inc. (Nasdaq: FDRY) with two new devices. HP is putting its new 6400cl and 6410cl 10-Gigabit Ethernet switches up against Foundry’s EdgeIron 8X10G.HP is using price as a cudgel in the 10-Gig market as well. List prices for the 6400cl and 6410cl are $5,429 and $8,099, compared to the 8X10G’s $19,995. But there are some significant differences: The new HP boxes offer six ports, plus two optional uplinks, whereas the 8X10G offers eight-ports as standard.

Foundry declined to provide any comment for this article, although Flisi warns that cold hard cash can only do so much in the switch market.

”Price is a big factor, but it’s not the only one,” he says. “Awareness is probably HP’s biggest challenge.”

The company is still better known as a systems vendor, according to Flisi, which means it will have to pay serious attention to its network marketing efforts.

”They really need to be attentive not to confuse people with what their strategy is,” he adds.— James Rogers, Site Editor, Next-Gen Data Center Forum