How Cisco's Results Bode For Arista, FireEye, Palo Alto Networks

The strong first-quarter resultsfrom Cisco Systems, Inc. CSCO were weighed down by the company’s lower-than-expected second-quarter guidance due to a weakness in service provider orders.

JMP Securities analyst Erik Suppiger weighed in the impact of Cisco’s results on Arista Networks Inc ANET, FireEye Inc FEYE and Palo Alto Networks Inc PANW.

Arista

Cisco’s 33 percent growth in data center switching bodes well for Arista, as it indicates strong market demand.

“Cisco did not experience significant component shortages in its switching business, suggesting that the component shortages that impacted Arista are not pervasive; therefore, we believe they are less likely to last for an extended period,” Suppiger wrote in a note.

FireEye

Suppiger believes Cisco is taking “meaningful share” from FireEye via its AMP product, which reported 70 percent sales growth in the quarter. For context, third quarter sales of FireEye, the market leader in advanced malware protection, grew only 13 percent.

Palo Alto Networks

The analyst noted that Cisco’s upgrading of its installed base from its traditional firewalls to next-generation firewalls creates opportunities for other firewall vendors, such as Palo Alto Networks to penetrate Cisco’s accounts when Cisco prompts customers to upgrade.

“In our view, it is a natural time for those customers to look at alternative solutions as Cisco is requiring them to replace their legacy solution,” Suppiger highlighted.

Suppiger maintained his Market Perform rating on Cisco shares, but lowered his FY 2017 EPS estimate to $2.33 (consensus: $2.43) on revenues of $47.5 billion (consensus: $50 billion) from $2.36 and $49.4 billion, respectively.

At Last Check

• Arista shares were up 0.15 percent at $88.20.
• Cisco shares were down 5.5 percent at $29.83.
• FireEye shares were up 0.92 percent at $13.74.
• Palo Alto shares were up 2.46 percent at $164.37.