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Cisco and Microsoft make small business together

The longtime partners sharpen their networking gear and office software bundle, to the potential detriment of rivals Hewlett-Packard and 3Com.

Cisco Systems and Microsoft will begin selling bundles of their lower-priced networking equipment to small businesses in April, the two companies announced Wednesday.

The first combination is a Cisco ethernet broadband router, meant for companies of fewer than 20 employees, and Microsoft's Small Business Server 2003 Standard Edition, which is itself a combination of the Windows Server operating system and Microsoft's Exchange e-mail server software. Included in the deal is integration support and software so router and server can work together.

Both companies expect the bundling strategy to make it easier for small- to medium-size businesses to begin using Internet Protocol (IP) telephone service, customer relationship management software and other IP networking applications once reserved for Fortune 500 outfits.

"Small businesses are moving to higher speeds, Internet telephony, more security," Cisco Systems Vice President Peter Alexander said. "This gives them a break on the key components." Businesses save 20 percent to 30 percent over what they'd pay if purchasing the equipment separately.

In the years Cisco and Microsoft have been working together, they've never before focused together on the small- to medium-size business, Alexander added.

Both companies have been aggressively trying to court small and midsize businesses Microsoft recently placed Orlando Ayala, its former sales chief, in charge of a $2 billion effort to land more sales from smaller businesses.

From Cisco's perspective, the new bundling strategy comes a few days after Chief Executive Officer John Chambers expressed concern that spending from small and medium-size businesses is still not at the level he would like to see. The Cisco and Microsoft partnership could also pressure Cisco competitors Hewlett-Packard and 3Com to lower prices of the networking equipment they sell to this market.