It looks like a long-running rumor is finally being confirmed: Cisco is entering the server market very soon. Our pal Ashlee Vance at the New York Times published a story yesterday, and our other pal, Timothy Prickett Morgan of The Register, chimed in with his take today. Between the two of them, they’ve mostly nailed the story down, although there are still major details that have yet to be disclosed – like what the actual systems will look like and when they will hit the market. We did a post covering the implications of this move back in December. While many are talking about how this is the end result of ‘cloudification’, or a move prompted by the virtualization trend, we believe the reasons really boil down to wallet share. With a compelling server offering, Cisco has the chance to harvest more revenue from enterprise deals. Right now, in many server deals, Cisco gear is an option in a server vendor price book – usually one of many alternatives. This model works well for Cisco, but it keeps them pinned in their network space – a role player in a deal, not driving the bus. With the servers, Cisco can now approach these deals with the ability to provide an entire solution – on paper at least. This will give them a shot at much higher revenue, and even though server margins are lower than networking equipment margins, all of this is revenue that Cisco would not have had otherwise. As long as their cost of sales doesn’t markedly increase, this incremental revenue will add to Cisco’s bottom line. However, you can be sure that Cisco products will disappear from many server vendor price books, which will have a negative impact on revenue. While this could cost the company, much of the damage can be repaired by working their indirect channels – the thousands of VARs and resellers who move the vast majority of x86 server gear. So the server wars are heating up; it’ll be interesting to watch the action….