Cisco (CSCO) Lower as Virtualization Business Faces Competition
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Rating Summary:
17 Buy, 36 Hold, 2 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 11 | Down: 12 | New: 13
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Yesterday, software maker VMware (NYSE: VMW) announced it was buying computer networking specialist Nicira for nearly $1.3 billion. The deal is meant to expand VMware's product line in the rapidly growing field of computer "virtualization." The term refers to software that lowers the costs of running data centers by enabling a single computer to function like multiple machines.
Today Bill Choi, an analyst at Janney, said VMware's acquisition of Nicira may accelerate adoption of SDN and create overhang on shares of data center-focused networking names including Cisco (Nasdaq: CSCO), Juniper (NYSE: JNPR), amd Brocade (Nasdaq: BRCD).
"Nicira's controller-based overlay solution works across any installed base of switch/router regardless of vendor, which may encourage customers to use commodity networking gear," said Choi.
The deal positions VMW to gain a major foothold into "fertile" SDN area and expand total addressable market in the cloud, FBR analyst Daniel Ives said. Ives expects increased number of enterprises to virtualize more of the datacenter in 2H and 2013.
Deutsche Bank analysts view Nicira as a fit to VMware's Software Defined Datacenter strategy, specifically in virtualized Layer 2 networking (i.e., "VM-VM" switching – not to be confused with network switching).
"Although Cisco is currently the market leader in virtualized networking, with millions of Cisco’s Nexus 1kv switches sold to date (leveraging UCS and Nexus), we think Cisco is likely to see growing competition, longer-term, from VMware and its partners (e.g., F5, Arista, etc) in virtualized Layer 2/3 and Layer 4/7 networking, especially in telcos and Cloud providers."
While Cisco's position in enterprise virtualized networking is at little risk, Nicira's solution may be competitive in telco use cases (e.g. Nicira's approach scales to 10Gb/s – ideal for service provider workload optimization).
Today Bill Choi, an analyst at Janney, said VMware's acquisition of Nicira may accelerate adoption of SDN and create overhang on shares of data center-focused networking names including Cisco (Nasdaq: CSCO), Juniper (NYSE: JNPR), amd Brocade (Nasdaq: BRCD).
"Nicira's controller-based overlay solution works across any installed base of switch/router regardless of vendor, which may encourage customers to use commodity networking gear," said Choi.
The deal positions VMW to gain a major foothold into "fertile" SDN area and expand total addressable market in the cloud, FBR analyst Daniel Ives said. Ives expects increased number of enterprises to virtualize more of the datacenter in 2H and 2013.
Deutsche Bank analysts view Nicira as a fit to VMware's Software Defined Datacenter strategy, specifically in virtualized Layer 2 networking (i.e., "VM-VM" switching – not to be confused with network switching).
"Although Cisco is currently the market leader in virtualized networking, with millions of Cisco’s Nexus 1kv switches sold to date (leveraging UCS and Nexus), we think Cisco is likely to see growing competition, longer-term, from VMware and its partners (e.g., F5, Arista, etc) in virtualized Layer 2/3 and Layer 4/7 networking, especially in telcos and Cloud providers."
While Cisco's position in enterprise virtualized networking is at little risk, Nicira's solution may be competitive in telco use cases (e.g. Nicira's approach scales to 10Gb/s – ideal for service provider workload optimization).
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