Monthly Networking Notes: Cisco, VMware, Juniper In Focus

Networking giant Cisco (NASDAQ:CSCO) announced last week that it has completed the acquisition of cloud-delivered enterprise security company OpenDNS. Cisco announced its intent to buy San Francisco-based OpenDNS in June in order to bolster its network security portfolio and help better market its proprietary products and fend off competition from open architecture networks. On the other hand, Juniper (NYSE:JNPR) continues to appease customers with its open network platform, with NASCAR team Joe Gibbs Racing most recently adopting the company’s switching and security solutions. Meanwhile, VMware (NYSE:VMW) recently announced an upgrade to its network virtualization platform, the VMware NSX. Here’s a quick roundup on recent trends and key developments in the networking market.

Cisco Leveraging Security To Bolster Its Proprietary Hardware

While open architecture confines the role of networking companies to providing a software layer, Cisco asserts that open networks using white-label hardware are more prone to cyber breaches than networks built with its proprietary hardware and software. Therefore, by enhancing its security features, the company is able to market and sell its complete networking solutions to customers whose prime concern is network security. Cisco is trying to build an architecture in every business division where hardware, software and service are integrated to make it more convenient for customers. This architecture essentially integrates Cisco’s Internet of Everything (IoE) concept with the cloud, data centers, mobility and security, absolving customers of the responsibility of integrating various systems.

The acquisition of OpenDNS is most relevant to the company’s strategy of enhancing network security. OpenDNS provides the company with predictive intelligence that blocks malware, botnets and phishing threats missed by antivirus  software and firewalls. Cisco has already integrated Open DNS services with its AMP Threat Grid, which will allows AMP customers to automatically benefit from OpenDNS’s features. ^[1] With earlier product launches such as AnyConnect, FirePOWER, and NetFlow, and acquisitions of Neohapsis, ThreatGrid, Sourcefire and now OpenDNS, Cisco has been efficient in explaining why security matters. It has thus convinced several customers to prefer its proprietary hardware over cheaper white-label hardware.

• We have a price estimate of $27 price estimate for Cisco, translating to a $136 billion market cap. Our price estimate is slightly above the current market price.
• We estimate the company’s 2015 revenues to be around $51 billion and earnings per share of $2.05 in FY 2016.

See our full analysis of Cisco

VMware Upgrades SDN Platform

VMware is ‘laser-focused’ on three key areas of growth including hybrid cloud computing, network virtualization and end-user computing. VMware’s network virtualization platform, called the VMware NSX, takes a separate approach to software-defined networking than Cisco (read more on VMware And Cisco To Fight It Out In The SDN Arena). VMware has seen a strong customer response for the NSX, with the number of paying customers rising to over 700 by the end of Q2, up from 400 at the end of December and only about 150 at the end of June 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 this 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 released the upgraded NSX 6.2 platform for “large installations” last week. ^[2]  The new version of the NSX is seemingly a better option for enterprise clients that want the NSX suite to handle higher workloads. Five out of VMware’s ten largest deals in the most recent quarter included NSX implementation. This upgrade signals an enhanced focus on large scale implementations in the coming quarters.

• Trefis has a $91 price estimate for VMware’s stock, translating into a $42 billion market cap. This is over 10% above the current market price. VMware’s market price has fallen by over 12% in the last month.
• We estimate the company’s 2015 revenues to be around $6.5 billion with EPS of $3.99, which is in line with the consensus according to Reuters.

See our full analysis for VMware

Juniper Focusing On Open Architecture Networks

While Cisco remains largely focused on its proprietary protocol, Juniper is moving ahead with open source architecture. The company has adapted well to the proliferation of cheaper white-label hardware, providing customers with open switching platforms, virtual switches and security products, and keeping the network cost-efficient. Juniper most recently announced that NASCAR team Joe Gibbs Racing (JGR) has selected the company to provide next-gen switching and security solutions for its outdated network infrastructure. The team has deployed Juniper’s QFX5100 (powerful feature set for virtualized data centers ) and EX4300 switches, with virtual chassis, that enables multiple switches to operate as a single device. JGR has also implemented Juniper’s Junos space, that automates switching, routing and security management, thus providing seamless network orchestration over white-label hardware. ^[3] With the industry gradually shifting from hardware to software-defined networking, Juniper is eyeing several potential customers who are looking to upgrade their respective networks. Accordingly, it makes sense for the company to keep innovating on the SDN front.

• Trefis has a $29 price estimate for Juniper’s stock, translating into a $11 billion market cap. This is slightly higher than the company’s market price of $26.
• We estimate the company’s 2015 revenues to be around $4.7 billion and earnings per share of $1.81 in 2015, which is in line with the consensus according to Reuters.

See our full analysis for Juniper Networks

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More Trefis Research 

1. Cisco Completes Acquisition of OpenDNS, Cisco, Aug 27 2015 [↩]
2. VMware quietly sneaks out NSX 6.2 update and/or bug-blast, The Register, August 2015 [↩]
3. NASCAR Team Joe Gibbs Racing Selects Juniper Networks to Speed Data Center Network Transformation, Juniper, Aug 18 2015 [↩]