) revenues from sales of networking equipment like virtual private
networks (VPNs) have risen consistently from around $1.1 billion in
2005 to around $1.9 billion in 2009. As the market for network
security grows with growing demand for data security, Cisco is
going to be a key beneficiary as it leads the market with around
40-45% share.Cisco competes with other players like Juniper (
), HP (
), Check Point (
) and McAfee (
) in the network security market.
As Cisco continues its integration of network security solutions
with its existing router platforms, this will result in higher
sales of its security products, thereby boosting its market
We expect Cisco's network security revenues will touch $3
billion by the end of Trefis forecast period. In comparison, Trefis
members project revenues will rise further to around $3.6 billion,
representing a slight advantage to our price estimate for Cisco's
stock. Since network security & other products constitute
around 9% of Cisco's stock, large growth in revenues will still
have limited upside to its stock price.
We currently have a
Trefis price estimate of $24.04 for Cisco's
, about 14% above the current market price of $21.12.
Growth in Network Security Market
Data security has become crucial for enterprises globally with
the challenge of managing huge amounts of data and threats from
hackers stealing data. Research firm IDC forecasts the global
network security market, that includes firewalls, VPNs, intrusion
prevention and detection, and multi-purpose security known as
unified threat management, will grow to $8.2 billion in revenues in
2011, which is 8% more than 2010 revenues. The majority of this
growth is expected to come from sales of hypervisor-ready solutions
for virtualization and Software-as-a-Service (SaaS).
Integration of Network Security with Router
Cisco offers integrated security solutions that are based on
secure, multi-service platforms for all market segments. Cisco is
coming up with new VPN modules which will be integrated with a
variety of its routing platforms. This means Cisco will have to
bear lower costs in terms of marketing its security products and
will benefit from additional revenues.
Trefis Community Forecast
Network security & other products account for around 9% of
Cisco's stock price according to our estimates. Hence changes in
revenues from this division will have limited impact on Cisco's
The Trefis community predicts that Cisco's network security
revenues will increase from $2.2 billion in 2010 to $3.6 billion by
the end of the Trefis forecast period, compared to the baseline
Trefis estimate of an increase from $2.1 billion in 2010 to $3.1
billion during the same period. The member estimates imply slight
upside potential to the Trefis price estimate.
complete analysis for Cisco's stock is here
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