Cisco is going into the server business, according to a story in the New York Times.

The virtualization-only blade server, that others say is code named California, will be bundled with Cisco networking hardware and VMware virtualization.

The Times even toys with the idea that Cisco might buy the downtrodden VMware. It would of course have to persuade EMC.

Cisco, you may remember, bought a pre-IPO piece of VMware as well as part of Intel's post-IPO share, roughly equal to 2%.

Evidently the system, which the paper says will put Cisco on a "collision course" with IBM and HP, could appear in March and earn Cisco far lower profits than the 65% margin it's used to. Cisco evidently wants to be more than switching and routing plumbing but could suffer broad-based OEM retaliation on the networking side if it isn't already happening.

Cisco's vision for the machine supposedly includes management software and storage. It reportedly wants to virtualize the entire data center with a family of products and an architecture called Unified Computing, or Data Center 3.0.

The paper says Cisco may have to do this to compensate for its slowing core business and Wall Street's growth demands.