uploads///Cisco security segment growth

Will FirePOWER Drive Cisco’s Security Segment Growth?


Nov. 12 2015, Updated 10:07 a.m. ET

FirePOWER security solutions 

Cisco’s (CSCO) FirePOWER series of security solutions is showing strong momentum. It helped Cisco become a major player in the network security firewall market. Although the company’s security segment’s growth has slowed down in the last few quarters, it expects YoY (year-over-year) double-digit revenue growth for this segment in the next few quarters. The following chart shows this trend.

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It will be interesting to understand how fast the FirePOWER series of security products are growing when Cisco announces its earnings results on November 12. In the last quarter, the company mentioned that it doubled the number of customers from 3,000 to 6,000 for its FirePOWER series in 4Q15. Until now, the growth in customers hasn’t been reflected in revenue growth for Cisco’s security segment. The reason for this slow growth is its rapid transition to subscription-based software for its security products.

This transition enabled deferred YoY revenue growth of 26% for its security segment in the last quarter. This healthy growth in deferred revenue is bound to get converted to actual revenue. This is why management is confident about the security business growing in the future.

Cisco leads the network security market

According to a report from Dell’Oro, Cisco’s share of the worldwide network security market was around 40% in calendar 2Q15. Fortinet (FTNT), Check Point Software Technologies (CHKP), Symantec (SYMC), and Palo Alto Networks (PANW) are some of the other players in this market. With the expectations of faster revenue growth for Cisco’s security segment in the future, we can expect its market share to also continue to grow.

If you’re bullish about Cisco, you can invest in the Technology Select Sector SPDR ETF (XLK). XLK invests 3.5% of its holdings in Cisco.


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