HP, Cisco Edging Closer?

It sounds counterintuitive, but departure of Hewlett-Packard CEO Carly Fiorina from Cisco’s board suggests closer ties between the technology titans, analysts say.

The companies characterized Fiorina’s move as a “personal decision,” but were quick to defuse rift talk.

“(CEO) John Chambers has said in the past he would like HP and Cisco to become closer partners,” Cisco spokeswoman Robyn Jenkins told internetnews.com “We look forward to the opportunity to explore a new, broadened relationship with HP.”

She declined to speculate what areas might be ripe for joint efforts.

Vijay Bhagavath, a networking analyst at Forrester Research, said a closer alliance is smart business for both companies.

“My guess is that Cisco and HP want to build a strategic alliance in servers and networking,” Bhagavath said. “They could tackle larger customers and offer one stop-shopping.”

Network gear giant Cisco needs to find new markets if it hopes to keep growing, and beat back challenges from Dell and others, Bhagavath said.

So why did Fiorina step down? Industry watchers believe her decision was designed to head-off future conflict-of-interest concerns. With corporate ethics under scrutiny, it would be unwise for Fiorina to shape Cisco policies that could affect deal flow to her own company.

If increasing cooperation is approaching, it would be consistent with Fiorina’s long-held strategy.

“A tightened HP/Cisco partnership (when competitor Sun was cozying up to Lucent) was one of the hallmarks of Fiorina’s early tenure as CEO but fell victim to the downturn,” said Richard Chu, an analyst with SG Cowen in Boston.

He added that this move may be “a prelude to an effort to revitalize early initiatives.”

Not that the companies have been strangers. Earlier this year HP, which makes computers and printers, and Cisco announced wireless local area network gear and utility computing initiatives.

HP’s services division also uses Cisco gear in its network design business. There is minor product overlap. HP makes a line of switches, but the business is small compared to Cisco’s and not viewed as a threat to chisel market share.

For its part, Chambers has been upbeat about a rebound in IT spending, but is also looking to boost Cisco’s revenue. Expanded partnership with HP , which has a presence in the coveted small and medium business market could help.

Fiorina is best know for successfully leading HP through the rocky acquisition of Compaq. She joined the board of the Cisco in January 2001, resigning from the boards at Kellogg Company and Merck and Co. to manage her time.

When her term Cisco term expires in November, she will serve on only one board — HP’s, and as chair.