Cisco Systems, the networking company, on Monday announced a move into the server market, posing a threat to IBM, Hewlett-Packard, Dell and Sun.

John Chambers, Cisco chief executive, said Cisco’s “unified computing system” would provide the next-generation platform for data centres, the vast computing areas that store corporate data. Cisco is offering an all-in-one box that combines its networking strengths, the latest computer processors from Intel and access to storage networks.

It is also co-operating with VMware to include money-saving virtualisation techniques that can divide servers into different virtual machines to complete tasks.

“No other company in the market can do what Cisco is doing. The gap between this and the rest of the market is measured in years,” said Bob Beauchamp, chief executive of BMC Software, another Cisco partner.

An IBM executive had described earlier talk by Cisco of a move into servers as “crossing...the demilitarised zone between networking and data centres”.

But Tim Stammers, analyst with the Ovum consulting firm, said IBM and HP were already challenging Cisco on its networking territory, with HP’s Procurve switches and IBM’s co-operation with Cisco’s smaller rival Juniper.

Analysts say Cisco is entering a lower margin, more commoditised market, but would be able to charge more for its combination product.

Server sales are also experiencing sharp falls in the economic downturn.

Gartner, the research firm, reported this month that server shipments declined by 12 per cent and revenues by 15 per cent in the fourth quarter, compared to the previous year.

IBM had a 33 per cent market share, followed by HP with 30 per cent, Dell with 11 per cent and Sun on 10 per cent.

Cisco can point to growth in the “blade” server segment of the market that will be part of its offering. Blade servers are thin computers that slide into a chassis which can contain multiple units, packing capacity into a compact space.

Rob Lloyd, Cisco’s executive vice-president designate of worldwide operations, said the emphasis on virtualisation, where tasks can be consolidated on fewer servers, would also appeal to companies seeking efficiency savings.

Rick Becker, vice-president Software and Solutions at Dell, questioned whether companies would want to buy an all-in-one product.

“Chief information officers aren’t looking for proprietary point products because they drive up total cost of ownership and create more complexity,” he said.

Additional reporting by Maija Palmer in London