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Trefis ) -- Cybersecurity threats are receiving lots of attention in the wake of reported attacks on


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The companies' Web sites were deluged with heavy traffic, slowing access for customers. Lawmakers are pushing for stricter cybersecurity laws, and this bodes well for the growth of the network security market, which includes players like


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Could this trend create upside to Cisco's stock value?

Our price estimate for Cisco currently stands at $24.04, already 18% ahead of the market price. Network security is one of Cisco's many product segments, and we estimate that this business contributes roughly 9% of Cisco's total stock value.

Market Share Declines in Recent Years

Cisco offers security products such firewalls, intrusion prevention, remote access and virtual private networks (VPNs). We estimate that Cisco earned close to $1.9 billion in network security revenues in 2009.

Cisco has seen a notable decline in its network security market share over the past few years. Given the potential market growth in the years ahead, we investigate how Cisco could benefit if the company is able to restore its market share back towards historical levels of between 40% and 50%.

In 2008, Cisco controlled about 40% of the $5.5 billion worldwide network security and appliances market, according to Infonetics Research. However its share declined to 38% in the first quarter of 2009 and slipped further to 35% in the second quarter of 2009. As Cisco's market share fell, competitors like Juniper,

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and McAfee grabbed a larger share of the pie.

Network Security Market Poised for Growth

According to a 2009 report published by Global Industry Analysts, the global network security market could hit $9.5 billion by 2015, with the growth largely fueled by the Asia Pacific region. Additionally, the Intrusion Detection System/Intrusion Prevention System (IDS/IPS) market is expected to become the second largest product segment of the network security market. According to a survey conducted by Infonetics research, Cisco is the market leader in this segment and the preferred choice for companies as an IDS/IPS vendor. The company can potentially leverage its lead position to further expand in this segment and gain share of the network security market.

Limited Upside to Cisco from Network Security Gains

A market share of 50% in 2015 would imply revenues of close to $4.75 billion for Cisco in the network security market. Even with such an ambitious scenario, the potential upside to the company's stock value is limited (about 3%), as Cisco remains much more leveraged to other product lines including network switches (27% of Cisco's stock value), network services (17%) and routers (16%). Comparatively, we estimate that Cisco's network security operations only generate 9% of the company's stock value.

Drag the trend-line in the chart above to see the impact of various network security revenue scenarios on Cisco's stock value.

You can see

the complete $24.04 Trefis price estimate for Cisco's stock here


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--Written by Trefis.

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This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.