uploads///Cisco integrated infrastructure market share

Will Cisco Please Investors with Its Earnings Results?


Nov. 11 2015, Updated 9:07 a.m. ET

Cisco’s peers failed to meet analysts’ earnings estimates

In the last part of the series, we discussed how some of the tech giants managed to beat analysts’ estimates in this quarter’s earnings season. Keeping up with this trend, Cisco (CSCO) could also beat all of the earnings estimates and provide strong fiscal 1Q16 results. However, Cisco’s peers in the hardware space like EMC (EMC) and F5 Networks (FFIV) provided weaker-than-expected results in the last quarter.

EMC’s stock fell by about 7% in the last month after a weaker earnings announcement. Currently, EMC in the process of getting acquired by Dell. EMC’s virtualization software and services arm, VMware (VMW), will still be an independent company even after the merger.

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Cisco partnered with EMC and VMware

Cisco, EMC, and VMware share a very close relation. Cisco sells its UCS (Unified Computing System) products through a joint venture with EMC and VMware, popularly known as “VCE” (VMware, Cisco, EMC). The companies created the joint venture with a vision of establishing a converged infrastructure for data center consolidation, IT-as-a-service, and the cloud computing market. VCE offers enterprise IT solutions using technologies from VMware’s computing, Cisco’s networking, and EMC’s storage.

VCE is the leading player in the worldwide integrated infrastructure market. According to a report from the IDC (International Data Corporation) and as the above chart shows, VCE had a share of 24.3% in this market in the quarter ending in June this year. This was followed by Cisco and NetApp with a share of 22.5%. Cisco sells products under the name “FlexPod” in its partnership with NetApp (NTAP). Essentially, this is a combination of Cisco’s UCS and NetApp’s FAS (fabric-attached storage) products. HP (HPQ) and EMC are the other top players in this market.

If you’re bullish about Cisco, you could invest in the PowerShares QQQ Trust, Series 1 (QQQ). QQQ invests about 2.8% of its holdings in Cisco.


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