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Everyone Loves IBM

Craig Matsumoto
5/22/2009

7:40 AM -- Juniper Networks Inc. (NYSE: JNPR) might soon announce an OEM deal with IBM Corp. (NYSE: IBM), just as Brocade Communications Systems Inc. (Nasdaq: BRCD) did. (See IBM to Resell Brocade/Foundry Gear.) It could happen "within the next month or two," analyst Catharine Trebnick of Avian Securities LLC wrote in a research note yesterday.

This won't be much of a surprise, for a number of reasons, and not just because we just told you about it. When IBM announced it would resell Brocade's newly acquired Ethernet gear, Juniper was quick to remind everyone that it's been an IBM partner, too, for a couple of years, and that the two companies had put together a cloud computing event in February. (See IBM, Juniper Get Closer.) The Brocade/IBM relationship isn't exclusive on either side, so IBM is free to offer other people's routers -- people like, you know, Juniper.

Brocade doesn't seem particularly threatened by any of this, considering it's been selling storage gear through IBM for 11 years.

"What I think is misunderstood is just how tough these OEM relationships are to pull off effectively. A lot of people think of them as essentially [handing off] of distribution and resale," says Dave Stevens, Brocade's CTO. "We have large teams of people that know the IBM sales process and know the OEM process, and they concentrate on maintaining the relationship between the two companies. It's a really complicated beast."

Now, most people think these OEM deals for IP/Ethernet gear are the result of IBM's dissatisfaction with longtime partner Cisco Systems Inc. (Nasdaq: CSCO), which, of course, is getting its tendrils into more and more of the data center. (See Cisco Dreams of Data Center Unity.)

The new partnerships won't necessarily hurt Cisco, though, at least not in short-term revenue terms. Analyst Mark Sue of RBC Capital Markets put out a research note earlier this week that says IBM and Cisco are still pals: "We believe the relationship between the two large tech vendors remains healthy across numerous levels and, if anything, IBM and Cisco may announce an expanded partner program over the next few weeks for next gen data centers and services."

— Craig Matsumoto, West Coast Editor, Light Reading

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