Category Archives: Citrix

Latest Market Data Prompts Questions on Cisco Dominance

New data on the state of the Ethernet-switching market surfaced yesterday and today.

First, Dell’Oro Group reported that the Ethernet-switching market grew sequentially at a 20-percent clip in the fourth quarter of 2009. As a result, Cisco, HP, and Juniper were said to have added $600 million in incremental revenue.

Said Alan Weckel, director of research at Dell’Oro:

“Year-end budget spending and supply constraints from the previous quarter helped propel market growth in the fourth quarter. We expect the market to continue to expand in 2010, especially as 10-Gigabit Ethernet continues to grow not only as a server connectivity technology but also as an aggregation technology within the data center.”

Indeed, growth in the Ethernet-switch market is being driven exclusively by adoption of 10-GbE in data centers.

The next piece of market data came from Nikos Theodosopoulos, research analyst with UBS Research. Om Malik reports that Theodosopoulos combed through the Dell’Oro data, did some analysis, and made a few observations of his own. Salient among them is that Cisco is suffering market-share erosion — albeit not of the vertiginous sort — across many of its core switching and routing product groups, among both carrier and enterprise customers.

As reported by Jim Duffy of Network World, Theodosopoulos found that, while Cisco lost share in 2009, vendors such as HP, 3Com, Juniper, Brocade gained ground in the market for Layer 2 and 3 switches. Higher up the stack, F5 Networks and Citrix captured share in the Layer 4-7 segment.

On the routing side of house, Alcatel-Lucent and Juniper advanced relative to Cisco in carrier edge routing. In core routing, Huawei increased its share by nearly two percent while Cisco lost a touch of ground. Meanwhile, Cisco’s share was unchanged in 2009 in enterprise routing.

So, is this the beginning of a steady decline in Cisco’s mainstay businesses? It’s far too early to say. It could be nothing more than a short-term anomaly conditioned by severe recessionary conditions (though Cisco has gained share in previous downturns). Besides, Cisco’s switching and routing franchises are so entrenched that meaningful deterioration in the company’s business fundamentals would be unlikely to occur for some time.

Steady commoditization is the biggest threat CIsco faces in its switching and routing redoubts, and the company saw that threat coming long before now. Confronting low-priced, good-quality, standardized gear from Huawei and 3Com (among others), Cisco knew it had to diversity its product portfolio, not just into higher-end hardware — where it hasn’t done as well against F5, for example, as it might like — but also into software and services.

Just take a look at all the emerging market adjacencies Cisco has entered, including (but not limited to) forays into home networks and home-network management; telepresence, videoconferencing, and video-based collaboration; web-based collaboration and unified communications; mobile video cameras (the Flip); networked digital signage and video-based surveillance; and smart-grid infrastructure. Cisco isn’t stopping there, either. It will continue to push into other markets where data networking confers a feasible mandate.

The challenge for Cisco comes in growing these emerging markets, with their sustainable margins, while coming under mounting commodity pricing pressure in its established switch and router markets. Analysts should closely monitor how quickly these emerging spaces gain substantive traction for Cisco.

Now, you might reasonably ask, where does Cisco’s Unified Computing System (USC) fit? Some people think it was a mistake for Cisco to move into blade servers, that the networking giant made an ill-considered move when it encroached on the territory of erstwhile partner HP and others, such as IBM and Dell.

However, I think Cisco felt it had no choice. The future vendor value in data centers will derive from convergence and integration, which means software and services will be essential to success. The hardware, whether represented by servers or switches, will become commoditized.

Today, that hardware still provides revenue and some margin, but it can also serve as a platform for account consolidation. Fist, though, it’s essential to consolidate the hardware, which is exactly what Cisco and HP are doing. They’re using consolidated hardware to create integrated data-center solution stacks, effectively trying to lock out other players and manage account presence. They’re using hardware for initial leverage, but that’s not the end game.

IBM is taking a different tack, having made the transition to relatively sophisticated data-center software and accompanying services well before its two big rivals altered their courses. Some think IBM will buy a networking vendor, such as Juniper, but I’m not so sure. I think IBM views the underlying hardware as an interchangeable commodity, just the underlying plumbing above which orchestration and management software will run the show.

This battle is just beginning, though, so the vendors — and this humble observer — reserve the right to change tack.

F5 Mentioned as Takeover Target . . . Again

Looking at the search-engine terms that have led people to this impoverished blogdom, I see more than a few of you must have read the recent article in Barron’s on ten technology companies the publication has identified as takeover prospects.

The list includes the following companies: Riverbed Technology Inc.,
BMC Software Inc., F5 Networks Inc., Brocade Communications Systems Inc., Juniper Networks Inc., Red Hat Inc., Citrix Systems Inc., CommVault Systems Inc., 3Par Inc., and NetApp Inc.

Many of the aforementioned really do qualify as the usual suspects. F5 Networks, for example, has been the subject of periodic takeover speculation extending as far back as the late 90s. Obviously, none of that conjecture was validated. For now, anyway, I am willing to bet it will be no different on this occasion.

Among the companies listed, CommVault, 3Par, and perhaps Juniper seem most likely to find buyers in the near term.

F5 Delivers Strong Quarter, with Another on the Way

Despite difficult economic headwinds, F5 Networks sails ahead smoothly.

The application-delivery network specialist — whose competitors include Cisco Systems, Citrix Systems, and Juniper Networks — announced fourth-quarter financial results last night that surpassed market expectations. It also gave strong first-quarter guidance that ran ahead of analyst projections.

Fourth-quarter net income increased to $28.4 million, or 36 cents per share, from $19.7 million, or 24 cents per share, a year earlier. Revenue grew about 2 percent to $175.1 million, up from $171.3 million in the same quarter last year

The impressive results buoyed F5’s share price in after-hours trading last night, and the company’s share price has more than doubled during the past year.

F5 wrote the book on how to beat Cisco at its own game. The two companies originally fought it out in the load-balancing market, which then morphed into the application-traffic management space. F5 now calls what it does “application-delivery networking,” which is all about ensuring the secure, reliable, and fast delivery of applications.

Like any good technology company, F5 never stops innovating. It keeps adding software-based functionality to its product portfolio, looking to deliver more value to existing and prospective customers. The modular architecture of its flagship BIG-IP product family allows it to offer extensible solutions that can accommodate evolving requirements. The company is well placed, for example, to benefit from increased data-center virtualization and cloud computing.

File virtualization is a relatively new area for the company. The F5 Data Manager is in a nascent market, not contributing much to F5’s current revenue or profitability; but it’s a good example of how the company tries to anticipate where its customers might want to go next.

F5 also has a strong executive team, and a well-developed channel strategy worldwide. It wasn’t always that way, as the company’s veterans will tell you, but F5 reached a point where it understood that channel quality counts for more than channel quantity. Channel partners that are committed to F5 receive a commensurate and reciprocal level of support from the company.

It seems F5 always is the subject of acquisition rumors. That’s certainly been the case recently, with many observers speculating that the company might be acquired in an impending wave of data-center consolidation. It’s possible, but bear in mind that this company has resisted acquisition on at least a few occasions.

I have no doubt that F5 would be an attractive target for one or two prospective buyers, but I wonder whether the ardor would be requited.

Sophos Ponders NASDAQ Listing in 2010

Sophos, the UK-based security-software company, is preparing for a market flotation on NASDAQ in 2010, according to a report that first appeared in the Sunday Times.

The public offering would peg the company’s value at up to $1 billion, according to the report.

The company is 60-percent owned by Oxford University scientists Jan Hruska and Peter Lammer, who founded the business in 1985. A further 20 percent is owned by venture-capital group TA Associates, with 10 percent held by Investcorp, and the remainder held by founders and management.

A well-respected Internet-security vendor involved in a number of industry associations, Sophos has several technology partnerships with major players such as IBM, HP, Cisco, Sun Microsystems, Citrix, and Novell, among others.

Advised by Deutsche Bank, Sophos is said not to have made a decision on the timing of the offering.

Analyst Says F5 Gaining Ground at Expense of Cisco and Citrix

If an analyst at Deutsche Bank is to be believed, F5 Networks is not only benefiting from relatively bullish customer spending, but it’s getting the competitive measure of Cisco Systems and Citrix at the lucrative high end of the application-delivery networking market.

According to an Associated Press (AP) report, Deutsche Bank analyst Brian Modoff said his checks show F5 Networks’ biggest-spending customers in the technology, government, financial services, and telecommunications industries are placing more orders than anticipated for the company’s products.

Modoff also reports that “the competitive landscape continues to favor F5,” with the company doing especially well in high-end accounts.

Radware Changes Americas Leadership Again

Radware, a vendor of application switches, has announced that Ramesh Barasia will take over as its president of the Americas.

As noted at Morningstar, Radware tends to depose its Americas leadership every couple years, so Mr. Barasia might just be the latest in a long line of executives who fail to achieve market prominence for Radware products in those still-key markets.

That said, Morningstar takes a guardedly optimistic stance, noting that Radware has high hopes for the Alteon unit it acquired from the increasingly distressed, and nearly completely defunct, Nortel Networks. Radware optimists also cite the relative resilience and robustness of the application-switch marketplace, led by the likes of F5, Cisco, and Citrix.

Radware has been relatively strong in its technology, but comparatively weak in marketing and sales execution in the Americas. A pioneer in what was called the load-balancing marketplace, Radware has lost ground commercially and arguably technologically to F5 Networks over the years.

Radware is banking heavily on tapping the installed base of chronically neglected Alteon to break into Nortel enterprise and carrier accounts. The problem is, the Alteon installed base was defecting long before Radware took over, and the customer exodus appears nearly complete. Radware could be picking at bones rather than enjoying a succulent feast.

Yes, Radware has new leadership in the Americas, but we’ve seen that movie before. The challenge for Radware and Ramesh Barasia is to demonstrate that they can capitalize commercially on the Alteon acquisition.

Time will tell, starting with the company’s forthcoming quarterly results.

F5 Target of Recurring Acquisition Rumors

F5 Networks will announce financial results for its fiscal third quarter after market trading concludes Wednesday, July 22.

Having held its own against Cisco Systems in the load balancing and application-traffic management markets, F5 has established market leadership in what are now called application-delivery controllers (ADCs), in a space now classified as application-delivery networking (ADN).

Given F5’s market successes against the likes of Cisco and Citrix, it should come as no surprise that it is regularly the subject of takeover speculation. Such speculation has intensified of late, with IBM and Cisco frequently cited as potential acquirers.

IBM is probably the more likely of the two to make a bid for F5, but that doesn’t mean it will happen. F5 has been independent for a long time, defying many previous takeover rumors, and chances are it will continue to chart its own course.

Other companies might be interested in buying F5, but that doesn’t mean F5 is interested in being bought.

F5 Receives Plaudits as VMware Acquisition Rumor Surfaces

F5 Networks, the company that wrote the book on how to challenge and beat Cisco in a network-equipment market, is getting well-deserved plaudits on a couple fronts today.

First, F5 has been acknowledged by Gartner, Inc. as the worldwide market-share leader, based on revenue, for Application Delivery Controllers (ADCs) in the first calendar quarter of 2008. In addition, Gartner has placed F5 in the leaders quadrant of Gartner’s 2008 Magic Quadrant for Application Delivery Controllers.

Elsewhere, Joe Panettieri, writing at Seeking Alpha, provides his interpretation of why F5 has succeeded where so many other companies have failed: beating Cisco Systems in the world of computer networking.

It’s an interesting take, though I think Panettieri places too much emphasis on F5’s online community and not enough on the company’s channel strategy and its unswerving focus, from product management to sales, on understanding and properly prioritizing and addressing customer requirements.

F5, in taking command of the application-delivery networking space, does far more right than wrong, and Panettieri is right about how F5’s laser-sharp, deep-and-narrow approach has successfully countered Cisco’s broader-based strategy and product portfolio in the hotly contested market segment where the two companies have gone head to head.

Speaking of F5, a new rumor is making the rounds. This one posits that VMware is in the midst of acquiring F5.

I don’t know whether it will happen, but it does pass the plausibility test. VMware is under competitive siege in the virtualization space, and F5’s application-delivery networking could give edge, not to mention market-leadership in an established (and related) market. Moreover, F5 and VMware already have a partnership that seems to have worked well.

All previous rumors regarding acquisitions of F5 obviously have proven false, so we’ll have to see whether this one is the exception that ends them all.

EMC Not Worried About VMware’s Competition

Speaking to analysts today in Boston, EMC chairman and CEO Joseph Tucci said his company has "no intention of selling more of VMware." EMC now owns 86 percent of VMware, even after the latter’s obscenely successful IPO last August.

Tucci’s confirmation that EMC intends to keep its current stake in VMware speaks volumes. Above all, it indicates that EMC believes VMware is well positioned competitively despite adversarial forays by Dell, Oracle, Citrix, and Microsoft. Tucci stressed that VMware is preparing to release its fourth-generation virtualization product while most of its competitors are just entering the market.

That might be true, but VMware will have to stare down some daunting competition, and margin pressure will be inevitable. My guess is that Tucci and his lieutenants fully expect VMware to lose at least some of its ludicrously dominant market share. At the same time, they have calculated that VMware will remain the leading player in virtualization for the foreseeable future.

With a market capitalization of approximately $35 billion — not far behind EMC’s own market capitalization of $41.7 billion — VMware remains a solid investment for Tucci. Since EMC clearly isn’t in financial distress, expecting to see steady growth of its own as a result of a 60% compound annual growth rate (CAGR) for computer storage, there isn’t an urgent need for EMC to unload its VMware shares.

F5 Networks Continues to Repel Rivals

As two market analysts quoted in an Associated Press wire story attested last week, F5 Networks continues to frustrate its competitors and dominate the application-traffic-management marketplace.

The company, which competes against Cisco Systems and Citrix Systems, demonstrates that it is possible for a smaller, focused player to continually beat back industry titans in a well-defined market segment.

How does F5 do it, holding off repeated attacks by Cisco and a concerted incursions by Citrix more recently?

Jefferies and Co. analyst Bill Choi pretty much nails the answer:

F5’s fundamentals remain compelling, with continued market dominance, superior execution, strong end-market demand and solid product roadmap.

That about covers it. What’s implicit in all that, but what isn’t explicitly stated, is that F5 remains resolutely focused on serving its customers, giving them what they want today while also looking ahead to provide them with what they’ll need in the future.

F5 usually rips the cover off the ball when it makes its quarterly earnings statements, and — like others — I expect this past quarter’s results, to be announced after trading ends this Wednesday, to be typically stellar.

How’s Blue Coat Doing?

Blue Coat Systems is a possible turnaround story, and many eyes are focused on the company as it attempts to extricate itself from a stock-option backdating controversy while trying to lift revenue on the strength of relatively new offerings in WAN optimization and content security and control.

The company’s board of directors has yet to complete its investigation into BlueCoat’s past stock-option granting practices. That means, even though Blue Coat’s latest quarter closed at the end of October, we should not expect anything more than revenue to be reported by the company about two weeks from now.

Still, revenue growth will provide at least some indication as to how well the market is receiving the company’s new offerings. It also could potentially give us some insight into the extent to which revenue growth attributable to the company’s flagship web-caching/proxy products is weakening.

Blue Coat sought to aggressively promote and sell its WAN-optimization products this past quarter. A consensus view is emerging that, while Blue Coat has begun to make headway into its installed base with those products, it probably did not close enough WAN-optimization business in the just-ended quarter to appreciably lift its top-line number. In addition to having to address its own issues with field execution and the sales cycle, Blue Coat also is facing daunting competition, including red-hot WAN-optimization leader Riverbed Technology and networking behemoth Cisco Systems.

For that reason, I’m thinking that Blue Coat’s revenue in the October quarter will be on the low end of estimates, which range from $37.57 million to $38.23 million. It might even be a bit lighter than the $37.57 estimate.

As for when the stock-option backdating quagmire will be resolved, your guess is as good as mine. For all involved, let’s hope it gets sorted out sooner rather than later.

Riverbed Delivers Stellar Results, Reinforces WAN-Optimization Leadership Status

In its first quarterly results as a public company, Riverbed Technology exceeded analyst expectations and fortified its already strong credentials as a leading vendor in the fast-growing WAN-optimization marketplace.

Revenue for the September quarter was $24.6 million, up 36% sequentially and 247% over results in the corresponding quarter last year. The consensus revenue estimate of analysts was set at $21.4 million. The company recorded an earnings-per-share loss of 2 cents versus cents in the preceding quarter and eight cents in the corresponding quarter last year. Again, the company beat analysts’ expectations, which were pegged at a loss of four cents per share.

Riverbed’s results won plaudits from pleasantly surprised analysts, who noted that the company is taking a leadership position in delivering WAN-optimization solutions for enterprises.

JMP Securities’ Samuel Wilson was among those impressed at Riverbed’s quarterly performance and its future prospects. Noted Wilson:

Riverbed is the darling of the WAN Optimization market both in terms of product and mindshare. . . .The company’s growth opportunities are significant, leading to potential for upside earnings surprises from the company.

On the basis of Riverbed’s results, the company appears to be taking share from its most its WAN-optimization rivals, including Packeteer, F5, and Citrix.