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Corporate America may need fatter communications pipes for cloud computing, but the trend toward lower-cost hardware in data centers — including networking gear — doesn’t bode well for Cisco Systems ( CSCO ), says a JPMorgan report. Despite the rise of Amazon.com’s ( AMZN ) Web Services unit and Microsoft ’s ( MSFT ) Azure, money spent on public cloud computing services will account for only 7% of the $215 billion global data center market in 2016, JPMorgan analyst Rod Hall said in a recent note to clients. Hall forecasts that from 2016 to 2020, traditional data center infrastructure spending will fall at a 2% rate annually. The bigger problem for legacy information technology suppliers is that computer workloads are moving at a faster rate to infrastructure-as-a-service, or IaaS, providers, he says. Amazon Web Services is the biggest IaaS provider, through which customers rent computer servers and data storage systems via the Internet. Microsoft is No. 2, with Alphabet ’s ( GOOGL ) Google third. According to a JPMorgan survey of chief information officers, more than 40% of workloads could shift to the public cloud in five years. “A near-tripling of public cloud workloads represents a monumental architectural shift, which shows no signs of abating and is likely to create a major ripple effect across the entire technology landscape,” wrote Hall. “(We) continue to believe it represents material earnings risk for companies like Cisco.” Hall added: “Though companies like Cisco focus on the increased bandwidth required for big data they miss the fact that this inevitably drives companies to want to deploy commodity (data center) solutions faster in our opinion.” Cisco reports fiscal third-quarter earnings on May 18 after the market close. Scalper1 News
Scalper1 News