Network equipment maker Cisco Systems Inc said on Tuesday it was upgrading its servers, stepping up competition against more established players in the market like HP and IBM.

Cisco entered the server market last year with its Unified Computing System (UCS), a move that put it in direct competition with long-time sales partners Hewlett-Packard Co and International Business Machines Corp.

San Jose, Calif-based Cisco recently said it was unlikely to renew its resale partnership with HP.

Cisco said the latest upgrade, using new Intel processors and its own new networking chips, would make the servers more energy efficient, with power savings of around 30 to 50 percent compared to the first generation systems.

David Lawler, vice president in charge of product marketing in Cisco's server access and virtualization technology group, said it currently had over 400 UCS customers and that the upgrade would help it win more.

We only started shipping 9 months ago and the amount of traction... has been tremendous. The second generation is going to accelerate that, he said.

With increasing Internet traffic and complex technology needs, companies have been seeking more simple and energy-efficient ways to manage data centers -- a trend that Cisco, HP and IBM have been trying to tap with advanced systems that include storage and virtualization technologies.

With the economy... customers are much more open to looking at technologies that are more innovative, that allow them to drive down their costs, Lawler said. When things are difficult, you look for a way to get the something done with less.

(Reporting by Ritsuko Ando; editing by Carol Bishopric)

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