Networking Monthly Notes: Cisco, VMware, Juniper And The SDN Market

+10.64%
Upside
49.27
Market
54.51
Trefis
CSCO: Cisco logo
CSCO
Cisco

Networking giant Cisco (NASDAQ:CSCO) recently reported a 55% sequential rise in the number of customers for Nexus 9000 in its Q2 FY 2015, highlighting a continued period of strong customer adoption for its software-defined networking (SDN) product. Virtualization and cloud computing provider VMware (NYSE:VMW) reported more than 400 paying customers for VMware NSX, its own version of network virtualization and software-defined networking, in its Q4 earnings report at the end of January. Juniper Networks (NYSE:JNPR) had announced the release of its virtualized MX router (or vMX 3D Universal Edge Router) back in November. However, in its recent earnings release, Juniper management mentioned that the company’s penetration in the virtualization market was still very limited. Juniper recently announced a partnership with Mirantis to deliver open source SDN fabric to scale clouds. According to SDN Central, software-defined networking is set to grow at a CAGR of 80% from a $3.4 billion market in 2013 to $35 billion through 2018. [1] Here’s a quick roundup on recent trends and key developments in the software-defined networking market.

Cisco Systems

In its latest earnings call, Cisco reported a strong customer response for its Nexus 9000 series of switches, with its customer base growing to 1,700 from 900 in the previous quarter. [2] Cisco has witnessed a sustained rise in the number of customers for Nexus switches, which had about 580 customers in the company’s Q4’14. [3] Management mentioned that Cisco’s Application Centric Infrastructure (ACI) approach to SDN is winning the “perception battle” 0ver alternative technology used by competitors. Additionally, the company announced that it acquired two companies during the quarter, Metacloud and Memoir Systems, that should help enhance its offerings in the cloud computing and software-defined networking domains.

Relevant Articles
  1. Down 6% In Last 3 Months, Will Cisco Stock See A Recovery Following Q2 Results?
  2. Why Is Cisco Buying Splunk?
  3. Why The Digital Infra Theme Continues To Outperform
  4. What To Expect As Cisco Publishes Q3 Earnings?
  5. Cisco Stock Looks Like A Buy At $52
  6. Here’s Why Cisco Systems Stock Has Returned Just 9% Since Late 2018

On the other hand, Cisco could be threatened by Hewlett-Packard (NYSE:HPQ) entering the market. The computing giant announced its collaboration with networking company Cumulus Networks to make switches that will operate Linux-based networking software and could potentially scale up the adoption of white box switches. [4]

  • Trefis has a $26 price estimate for Cisco’s stock, implying a market cap of $135 billion. The company’s stock price rose by over 10% to over $30 per share in the two weeks following its FY Q2 earnings in mid-February. Since the beginning of March, Cisco’s stock has fallen by about 5% and was trading at over $28 per share through Friday.
  • We estimate the company’s 2015 revenues to be around $49  billion and earnings per share of $2.12 in FY 2015, which is in line with the consensus according to Reuters.

See our full analysis for Cisco Systems


VMware

VMware is focused on its own network virtualization platform called VMware NSX, which takes a separate approach to software-defined networking than Cisco (see: VMware And Cisco To Fight It Out In The SDN Arena). VMware has witnessed strong customer demand for the NSX platforms with the number of customers rising by 60% quarter over quarter to 400 customers in the quarter ending December. VMware had only about 150 customers for the NSX at the end of the June quarter last year. The number of license bookings doubled for VMware in the second half of 2014, and the company is now in a position to generate revenues of over $200 million from this market segment through the year. VMware’s NSX platform (unlike Cisco’s ACI) is a pure-software approach to SDN and does not make use of propriety hardware. VMware penned a few major deals during the quarter with large enterprise customers such as Palo Alto Networks, F5 Networks (NASDAQ:FFIV) and Hewlett-Packard (NASDAQ:HPQ). In addition, VMware also signed a global reseller agreement with computing giant Dell (NASDAQ:DELL). [5]

  • Trefis has a $90 price estimate for VMware’s stock, translating into a $38.8 billion market cap. This is about 10% above the current market price. VMware’s market price has fallen by over 5% since the beginning of the month.
  • We estimate the company’s 2015 revenues to be around $6.6 billion and an EPS of $3.99, which is in line with the consensus according to Reuters.

See our full analysis for VMware

Juniper Networks

Earlier in the month, Juniper announced the launch of its vMX 3D Universal Edge Router to compete with Cisco’s 1000v Cloud Services Router and Brocade’s Vyatta range of products. [6] The network infrastructure provider launched a network functions virtualization (NFV) platform called Contrail Cloud last year, which helps integrate virtualization, storage, compute and network access. Although the company is relatively late in entering the SDN market, its recent collaboration with Mirantis could leverage the latter’s OpenStack capabilities to develop open-source SDN solutions. The integrated solution, which would include Juniper Contrail Networking and Mirantis OpenStack, is based on an alternate architecture to that of the VMware NSX. [7]

  • Trefis has a $25 price estimate for Juniper’s shares, translating into a $11.2 billion market cap. This is slightly higher than the company’s market price of $23-$24 seen over the month.
  • We estimate the company’s 2015 revenues to be around $4.6  billion and earnings per share of $1.64 in 2015, which is in line with the consensus according to Reuters.

See our full analysis for Juniper Networks

View Interactive Institutional Research (Powered by Trefis):
Global Large CapU.S. Mid & Small CapEuropean Large & Mid Cap
More Trefis Research

Notes:
  1. SDN Market Size to reach $35B by 2018, SDN Central, April 2013 []
  2. Cisco Q2 FY2015 Earnings Transcript, Seeking Alpha, February 2015 []
  3. Cisco Q1 FY2015 Earnings Transcript, Seeking Alpha, November 2014 []
  4. Cisco: Despite HP’s Switches, Little SDN Threat, Say UBS, Bernstein; JP Morgan Sees Risk, Barrons, February 2015 []
  5. VMware Now Claims More Than 250 Customers Are Paying For NSX Software-Defined Networking, CRN, October 2014 []
  6. Juniper’s MX Router Goes Virtual, SDN Central, November 2014 []
  7. Mirantis links up with Juniper over Contrail SDN to scale up OpenStack clouds, ZD Net, March 2015 []