Cisco Primed for Explosive Traffic Growth Driven by the Cloud

December 15th, 2011 by Sharon Singleton
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Cisco (NASDAQ:CSCO), which competes with HP (NYSE:HPQ) and IBM (NYSE:IBM) in the cloud computing market, is expecting global cloud-based traffic to surge 12-fold from current levels giving a compound average growth rate of 66% a year through 2015. In its inaugural Cisco Global Cloud Index, the networking equipment and technology company says cloud traffic will hit 1.6 zettabytes annually from 130 exabytes today. This is roughly equivalent to 22 trillion hours of streaming music or 5 trillion hours of business web conferencing with a web-based camera. [1]

Cloud computing is frequently cited as a “game changer” in the technology industry, marking a shift towards providing services that are accessible on mobile devices such as tablets, rather than storing data on location-specific individual computers.

According to Trefis analysis, Cisco is likely to be a big winner from the soaring growth in cloud computing. Trefis currently has a $21.21 target on Cisco, almost 14% above the current market price.

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The company is at the forefront of providing network hardware capabilities needed to power large-scale data transfers to the cloud. It has also been beefing up its software portfolio. Earlier this year it bought San Francisco startup Versly, which develops collaboration tools that integrate with Microsoft Office applications and Axiom.

Deutsche Bank recently recommended buying the stock, citing pockets of strength especially in cloud-related areas, such as 10-megabit ethernet switches, application virtualisation and security. Still, Cisco may have some catching up to do with its rivals.

According to a report this week by Reno-based Synergy Research, HP leads in cloud equipment sales with an almost 20% market share. IBM comes in second with 18%, Dell third with 14.7% and Cisco fourth with a 10.4% share. Synergy estimates the market for infrastructure equipment will top $33 billion this year, with sales in the first half exceeding $17 billion. The private cloud platform is the fastest-growing segment, expanding at an annual clip of more than 30%.

However, as concerns about security are laid to rest, the public cloud sector is also likely to show exponential growth as governments seek to trim their IT budgets. [2]

This article was submitted as part of our Trefis Contributors program. Join our contributor network and submit a post powered by data and interactive charts.

Notes:
  1. Cisco press release: http://www.marketwire.com/press-release/new-cisco-global-cloud-index-projects-cloud-computing-traffic-grow-12-fold-2015-cloud-nasdaq-csco-1592108.htm [↩]
  2. Synergy press release: http://www.marketwire.com/press-release/cloud-infrastructure-equipment-to-exceed-33b-in-2011-1591593.htm [↩]