Strong Channel Checks Show Cisco (CSCO) Taking Share in Security and Server Markets

Jason Ader from William Blair conducted channel checks and is confident in the tone of business with two weeks to go in Cisco’s quarter. Sources of strength include:

1) strong security sales with rapid growth in next-generation firewalls
-sharp increase in VAR enthusiasm around Cisco’s position in the cybersecurity market, after a prolonged period of underperformance
-several VARs pointed to better attach rates of Cisco’s next-generation features (e.g., IPS, application visibility), which led to higher deal sizes, higher software content, and more professional services engagements
-channel chatter is signaling a major security product launch in March(integrated security management platform with Web security, identity access, and next-generation firewalls)

2) refresh in enterprise switching as upgrades to higher speeds and pull-through from product cycles in other segments
- Upgrades to higher-speed 10-gigabit campus switches with 40-gigabit uplinks (Catalyst family)
- Meraki continuing to achieve strong win rates in the market

3) strong momentum for Nexus 9K switches and good traction for ACI
- Strong adoption of Nexus 9K switches in the data center
-ACI training for their engineers has ramped up, and hundreds, if not thousands, of the engineers will be ACI-certified within a few quarters
-we are still at the lab trial/pilot/proof-of-concept stage but ACI provides a long-term upgrade path for Cisco customers and a strong bulwark against potential encroachment by VMware’s (VMW) NSX

4) continued UCS share gains in a tight server spending environment
-channel contacts continue to point to healthy demand for Cisco’s UCS offerings, despite an overall sluggish environment for server spending
-technical merits are helping Cisco gain share from HP (HPQ), Dell and IBM (IBM)

No change to Outperform rating.

For an analyst ratings summary and ratings history on Cisco click here. For more ratings news on Cisco click here.

Shares of Cisco closed at $28.25 yesterday.

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