Cisco Systems said that it will release news about its plans to enter the server market. Special interest on company's entrance in the server market pay Hewlett-Packard and IBM, both long term partners of Cisco.

Cisco made an announcement about its intention to start producing data storage devices this January. This is considered as a very important step for the company, which has been focused on producing networking equipment.

The Cisco's descision to enter the server market sparked a buzz in IT markets. Companies that used to buy Cisco's products for billions of dollars each year are expected to give back tough competition to Cisco in the networking equipment producer.

Many of the industry's analysts said that the Cisco might face hard times because the profit margins in server market are lower than those in company's core business.

Cisco is expected to present a server code-named "California". The company plans to integrate VMware virtualization technology software.

According to hosting industry analysts "California" is a product in the "Blade" class servers. It is thin, low-end server, whcih can be installed into racks in great numbers. "California" is powered by Intel processors.

"Cisco's goal is to radically change the way data centers are designed, built and operated", explains the industry analyst Sanjiv Wadhwani in a research paper.

He adds that Cisco will be able to charge a premium for servers that can use virtualization to configure themselves regardless of physical location. It could be a $5 billion business for Cisco in a few years, Wadhwani believes.