Cisco joins cloud computing race with $1 billion plan

Mon Mar 24, 2014 6:27pm IST

A visitor walks past a Cisco advertising panel as she looks at her mobile phone at the Mobile World Congress in Barcelona February 27, 2014. REUTERS/Albert Gea/Files

A visitor walks past a Cisco advertising panel as she looks at her mobile phone at the Mobile World Congress in Barcelona February 27, 2014.

Credit: Reuters/Albert Gea/Files

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(Reuters) - Cisco Systems Inc (CSCO.O) plans to offer cloud computing services, pledging to spend $1 billion over the next two years to enter a market currently led by the world's biggest online retailer Amazon.com Inc.

Cisco said it will spend the amount to build data centers to help run the new service called Cisco Cloud Services.

Cisco, which mainly deals in networking hardware, wants to take advantage of companies' desire to rent computing services rather than buying and maintaining their own machines.

The company said it plans to deliver the service with and through partners including Australian telecom service provider Telstra (TLS.AX), tech distributor Ingram Micro Inc (IM.N), and Indian IT company Wipro Ltd (WIPR.NS).

"Customers, providers and channel partners ... want to rapidly deploy valuable enterprise-class cloud experiences for key customers -- all while mitigating the risk of capital investment," Rob Lloyd, Cisco's president of development and sales, said in a statement.

Cisco's plans were first reported by the Wall Street Journal.

Enterprise hardware spending is dwindling across the globe as companies cope with shrinking budgets, slowing or uncertain economies and a fundamental migration to cloud computing, which reduces demand for equipment by outsourcing data management and computing needs.

Microsoft Corp (MSFT.O) last year said it was cutting prices for hosting and processing customers' online data in an aggressive challenge to Amazon's lead in the growing business of cloud computing.

Shares of Cisco, which closed at $21.64 on Friday on the Nasdaq, were up 0.28 percent at $21.70 in pre-market trading on Monday.

(Reporting by Arnab Sen and Supriya Kurane in Bangalore; Editing by Gopakumar Warrier and Savio D'Souza)

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