Cisco Systems, Inc. (NASDAQ:CSCO) has been downgraded from a Buy to a Hold rating by Wunderlich Securities analyst Matthew S. Robison, in a report released on April 8, 2014. According to the analyst, the market has relatively less interest in the company’s product suite, and there are many alternatives available for network automation/software defined networking (SDN), network function virtualization (NFV), and cloud services, which could prove a threat for Cisco.
Robison also lowered the 12 month price target on the networking company to $24 from $25, previously. The analyst believes “Cisco shares to be close to fully valued.”
Chris Hohn the founder and manager of TCI Fund Management was the star speaker at this year's London Value Investor Conference, which took place on May 19th. The investor has earned himself a reputation for being one of the world's most successful hedge fund managers over the past few decades. TCI, which stands for The Read More
ACI from Cisco “off to a slow start”
The market for Cisco Application Centric Infrastructure (ACI), which might be the best option available in the market for SDN, is “slower to develop” compared to previous cycles, according to the analyst. Indications from the Interop, last week, suggest that primarily new entrants in the cloud computing space would go for ACI, while existing bigger players including “hyperscale data centers, established cloud service providers, or large enterprises” may not prefer the technology.
Cisco Systems, Inc. (NASDAQ:CSCO)’s ACI suite might not have received a warm welcome, but the core switch for ACI, the Nexus 9000, is performing well among a few of the very large data centers. However, the analyst believes that customers that have reasonable technical resources, like hyperscale and established cloud providers, are mixing the Cisco 9000 with other mid-range and low-end switches from other brands, including white box solutions.
Intense competition expected
In March, Cisco Systems, Inc. (NASDAQ:CSCO) came up with a billion dollar investment partnership with potential cloud services providers to build data centers. A majority of these cloud services providers were early adopters of ACI. The partnership could help the new entrants to expand more in the B2B cloud service market. However, the analyst believes that the program is more of an equipment rental effort, and “recognition of industry wallet share shifting to Amazon and other established cloud service providers,” who are not the fans of the new architecture from Cisco.
The acceptability of VMware’s NSX architecture is still not clear among the industry, but the analyst believes “a la carte alternatives” are more significant now than they have been. According to the analyst, smaller rivals with robust industry heritage have more potential among mid-range customers.