Home Daily Blitz Cisco Effect: Good for Security Names, Says FBR, Bad for Contract Mfg, Says RBC

Cisco Effect: Good for Security Names, Says FBR, Bad for Contract Mfg, Says RBC


barrons articleThe following is an excerpt from Tiernan Ray | November 13, 2015 | Barrons.com |

Shares of Cisco Systems (CSCO) closed down $1.62, or almost 6%, at $26.21, after a disappointing fiscal Q2 outlook yesterday, and some analysts in adjoining areas of tech gauged the impact on their coverage areas of the company’s disappointing January-ending financial outlook.

FBR & Co.’s Daniel Ives writes that Cisco CEO Chuck Robbins’s comments about a “choppy macroeconomic environment” match what he has been hearing from other IT vendors.

But he’s heartened by Cisco’s growth of 7% in security technology. After the debacle last week from FireEye (FEYE), the report seems to lend support to his positive outlook for the security industry overall:

After DeWalt and FireEye yelled fire in a crowded theater last week with their earnings debacle and blamed weakness more on industry softness than company specific issues, the Street is now reaching “panic levels” around the cyber security space and the stocks are under pressure accordingly. Is this epic multi-year cyber security spending run over? That is the main question we continue to be asked by nervous tech investors who are still feeling the aftershocks of DeWalt’s comments and FireEye’s shocker. To this point, the answer is no as we continue to point to massive strength in firewall spending and next generation cyber security initiatives (UTM, endpoint, email, database security) heading into 2016, while “emergency security spending” has ticked down which clearly impacts FireEye more than any other vendor. Cisco security share gains have subsided as the company has finally figured out the right formula/better execution and now the focus is on identifying the winners in the land grab opportunity for this $30 billion cyber pie over the next three years. We believe Palo Alto Networks, Proofpoint, Splunk (big data/security), Check Point, Imperva, and Fortinet remain front and center as winners with now all eyes on Cisco’s M&A strategy in security and if FireEye (and possibly Fortinet among others) now becomes a legitimate target in 2016 for Robbins as he looks to significantly expand Cisco’s security footprint in this fertile market for years to come.

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