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Cisco to Get Boost From Network Security Business

Trefis members see a modest gain in the stock from high-than-expected revenues in its network security business.
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Higher-than-expected revenues for Cisco's network security business will have a modest upside for

Cisco

's

(CSCO) - Get Report

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stock, since network security and other products account for only around 10% of Cisco's stock price.

Cisco competes with

Juniper

(JNPR) - Get Report

,

Alcatel-Lucent

(ALU)

, and

Tellabs

(TLAB)

in communications and networking equipment market.

We currently have a Trefis price estimate of $25 for Cisco's stock, about 17% above the current market price of $21.

Cisco provides network security products such as virtual private networks (VPNs) and firewalls. Despite competition, Cisco has been able to retain a market share of around 40% to 45% (by revenues) in the network security market.

Cisco's margins in the market are estimated to be around 60%, much in line with its high margin businesses like routing and switching. In the past, Network Security has increased from $800 million in 2003 to around $1.9 billion in 2009.

The average of Trefis member forecasts for network security indicate an increase from $2.3 billion in 2010 to $3.7 billion by 2016, compared to the baseline Trefis estimate of an increase from around $2.1 billion in 2010 to $3.1 billion by the end of the Trefis forecast period. The member estimates imply an upside of 1% to the Trefis price estimate for Cisco's stock.

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Trefis Members constitute more than tens of thousands of users of the Trefis platform, inclusive of investors, financial analysts, and business professionals who use the Trefis platform to create their own models and price estimates.

Trefis

is a financial community structured around trends, forecasts and insights related to some of the most popular stocks in the U.S.