Light Reading
Wunderlich cuts Cisco, Jefferies isn't so pessimistic, while Raymond James sticks with an 'Outperform' rating, as financial analysts try to glean the company's prospects in a more virtualized networking world.

Financial Analysts Split on Cisco's Outlook

Dan Jones
4/8/2014
50%
50%

Some financial analysts are split on Cisco's future prospects in a more software-defined and virtualized networking world.

Raymond James Financial Inc. (NYSE: RJF) continues to hold Cisco at an "Outperform" rating, setting the share target price at $26.00. "We believe Cisco's position is better than appreciated," writes analyst Simon Leopold in a report.

"We think investors struggle to determine its ability to restore growth," Leopold writes. "We perceive material Fear, Uncertainty and Doubt (FUD) that has weighed on its largest reporting segment, Switching, and suspect confusion and concern have restrained the stock."

He argues that an improving US economy is typically a good indicator for Cisco Systems Inc. (Nasdaq: CSCO) "Improving employment and economic growth bode positively for Cisco's growth," Leopold states.

He also sees Cisco's product refresh, with products such as the Nexus 9000 data center switching series as positive, arguing that customers won't be using "white box" systems for crucial infrastructure like data centers. "We believe that most enterprises either lack the sophistication and resources to implement a white box strategy, or they view their datacenters as mission critical and complex and want to reduce the risk when implementing the 'white box' architecture," Leopold notes.

Centrist view
George Notter at Jefferies & Company Inc. also believes that many Wall Street views of Cisco "are a bit too pessimistic right now."

In a research note sent to clients, Notter notes that SDN is a way off, and it's early days for white box and Linux-based OS strategies. In addition, he believes Cisco's ACI plan, including the OpFlex alternative to OpenFlow, stacks up well against the SDN strategies of VMware and others. (See Goin' South: Cisco Offers 'OpFlex' as Alternative to OpenFlow and Cisco's ACI Gets Physical With SDN.)

"As the incumbent vendor in the Ethernet switching space, Cisco enjoys the benefit of doubt from their customers. Moreover, we think their ACI strategy will be enough to keep customers in the fold," he adds.

Notter has a hold rating on Cisco's stock, with a price target of $22.00.

The downer
A different analyst, however, sees SDN and NFV as a potential competitive threat for Cisco in the future and has revised its outlook accordingly. (See Goin' South: Cisco Offers 'OpFlex' as Alternative to OpenFlow and Cisco CEO: It's Early Days for Virtualization.)

Wunderlich Securities Inc. has downgraded Cisco on concerns about its future in SDN and NFV. The firm has cut its outlook from "Buy" to "Hold" and lowered the share price target from $25.00 to $24.00.

"We came away from industry interviews in recent weeks with the view that the market has less interest in the Cisco product suite than in past transitions," writes analyst Matthew S. Robison in a report quoted by Benzinga. "We see the range of alternatives for network automation/software defined networking (SDN), network function virtualization (NFV), and cloud services as dilutive to the Cisco installed base upgrade opportunity."

Cisco's stock is currently at $22.85, the same price at which it closed Monday.

— Dan Jones, Mobile Editor, Light Reading

(2)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View
gconnery
50%
50%
gconnery,
User Rank: Light Sabre
4/8/2014 | 11:33:02 PM
Fighting anti-US equipment sentiment due to NSA surveillance too
I don't see the upside.  The stock is volatile yet has been trading between 20 and 33 for 13 years now.  Sounds familiar right?  That's why Balmer is out at Microsoft now.  I wouldn't put money into the stock unless there was somebody new at the helm.  I don't see it.
sam masud
50%
50%
sam masud,
User Rank: Light Sabre
4/8/2014 | 1:25:59 PM
Mostly uphill for Cisco
While the SDN ecosystem is a ways from maturing, I don't see how disaggregation of the network (separation of control/forwarding) taken together with bare metal switches plays to the way how Cisco has come to dominate the infrastructure. Can Cisco change its approach and still be successful? That's something it will find very hard to do.
Flash Poll
From The Founder
It's clear to me that the communications industry is divided into two types of people, and only one is living in the real world.
LRTV Documentaries
EE: The Road to 5G

12|16|14   |   16:02   |   (1) comment


Andy Sutton, the principal network architect at UK mobile operator EE, explains how his company is using Wembley stadium as a wireless test bed and how that's helping EE to plan the evolution to 5G.
LRTV Huawei Video Resource Center
Highlights of Huawei's NFV Open Cloud Forum 2014

12|16|14   |     |   (0) comments


Huawei hosted its inaugural NFV Open Cloud Forum during the SDN & OpenFlow World Congress 2014 in Düsseldorf, Germany. The Forum brought together technology thought leaders, senior executives and telecom professionals from global carriers, industry associations, as well as other partner companies in the ecosystem, to exchange views on and collectively explore how ...
LRTV Custom TV
Realizing Operators' Digital Vision

12|16|14   |   5:23   |   (0) comments


Leveraging technology is fundamental to digital transformation but understanding customers and serving them really well is at the heart of digital businesses. TM Forum lists the following as the strategic pillars of the digital business: business agility and rapid innovation, operational agility and effectiveness, IT and data centricity, plus customer centricity. ...
LRTV Documentaries
US Cellular Injects Analytics Into LTE

12|16|14   |   2:57   |   (1) comment


US Cellular's Mario Vela explains how the operator uses analytics for network planning and what comes next as the carrier looks to eke more value out of its metrics.
LRTV Interviews
How Cox Biz Plans to Keep Growing

12|15|14   |     |   (1) comment


Steve Rowley, SVP of Cox Business, details how the third-biggest US MSO intends to boost its revenues to $2 billion and beyond over the rest of the decade
LRTV Huawei Video Resource Center
Interview With Bill Zhang, Director of SoftCOM Product Management, Huawei

12|15|14   |   2:50   |   (0) comments


Bill Zhang elaborated on Huawei's open philosophy in NFV solution development and network architecture design at the SDN & OpenFlow World Congress 2014.
LRTV Huawei Video Resource Center
Event Highlights: Huawei at SDN & OpenFlow World Congress 2014

12|15|14   |   3:43   |   (0) comments


Huawei joined the 2014 SDN & OpenFlow Congress as one of the key sponsors and contributors. At the event, Huawei reinforced the openness and flexibility of its network infrastructure strategies, and provided updates on its SDN and NVF innovations. Through participations at the exhibitions, forums and speeches, Huawei encouraged the industry to "think bigger and ...
LRTV Interviews
How Cable Biz Services Hit $10B Mark

12|12|14   |     |   (1) comment


Cable operators reached $10 billion in annual business services revenues by delving deeper into their vertical markets and expanding beyond the smallest firms.
LRTV Documentaries
Mediacom Aims to Test Connected Tractors

12|11|14   |   05:07   |   (3) comments


Cable business service provider is taking its services to the 'agribusiness' sector in partnership with farm equipment specialist John Deere and is getting involved in Gigabit Cities developments.
LRTV Interviews
TWC Business Looks Beyond $3B

12|10|14   |     |   (0) comments


TWC Business Services chief Phil Meeks explains how his unit has reached $3 billion in annual revenues and what its plans are for next year.
LRTV Documentaries
AT&T's New Security Strategy

12|10|14   |   02:36   |   (1) comment


AT&T's Chief Security Officer Ed Amoroso explains how his company is wrapping virtual security layers around micro network domains.
LRTV Documentaries
2020 Vision: A First View

12|9|14   |   02:25   |   (3) comments


At the 2020 Vision Executive Summit in Iceland, unique Heavy Reading research shows that comms service providers are optimistic about the next five or so years.
Upcoming Live Events
February 10, 2015, Atlanta, GA
April 14, 2015, New York City, NY
May 6, 2015, McCormick Convention Center, Chicago, IL
May 13-14, 2015, The Westin Peachtree, Atlanta, GA
June 9-10, 2015, Chicago, IL
Hot Topics
Vodafone to Ride T-Mobile Back Into US
Dan Jones, Mobile Editor, 12/12/2014
1-Gig: Coming to a Small Town Near You
Jason Meyers, Senior Editor, Gigabit Cities/IoT, 12/17/2014
Cisco Makes Big Analytics Push
Mitch Wagner, West Coast Bureau Chief, Light Reading, 12/11/2014
Gardner's Departure a Cautionary Tale
Carol Wilson, Editor-at-large, 12/12/2014
T-Mobile Lights Up 27 Wideband LTE Cities
Sarah Reedy, Senior Editor, 12/15/2014
Like Us on Facebook
Twitter Feed
Webinar Archive