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How Could Cisco’s Security Segment Perform in Fiscal 4Q16?

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What is network security?

Network security consists of policies adopted to prevent and monitor unauthorized access, modification, misuse, or denial of a computer network. It involves authorization of access to data in a network that’s controlled by the network administrator. Network security is accomplished through hardware and software.

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Major players in the security space

According to IDC (International Data Corporation), the worldwide security appliance market grew YoY (year-over-year) in vendor revenues as well as unit shipments in 1Q16. This was the 11th consecutive quarter of YoY growth in the security appliance segment.

Worldwide vendor revenues in 1Q16 rose by ~5.5% YoY to ~$2.5 billion, and units rose by 9% YoY, for a total of 580,007 shipments. In 2015, worldwide security appliance revenues rose by 9.9% to $10.6 billion.

Cisco Systems (CSCO) continued to dominate the security appliance market in 1Q16, with a share of 17.4%. Other top players in this space include Check Point (CHKP), Palo Alto Networks (PANW), Fortinet (FTNT), and Blue Coat, with shares of 13.8%, 12.4%, 10%, and 4.6%, respectively, at the end of 1Q16.

In 1Q16, Cisco’s revenue in this segment rose by 5.4% YoY to $429 million. Palo Alto Networks was the biggest gainer with revenue increase of 40.9% YoY, followed by Fortinet and Check Point at 29.6% and 11.1%, respectively.

Revenues rose by 17% YoY in fiscal 3Q16

In fiscal 3Q16,[1. quarter ended April 2016] Cisco continued to maintain significant YoY growth of 17% in the Network Security Business segment. Deferred revenue rose by 31% YoY, driven by Cisco’s ongoing shift from hardware to more software and subscription services. Revenues rose from $412 million in fiscal 3Q15 to $482 million in fiscal 3Q16.

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