2e9c7be1 3f75-4abb-bdc3-d868bc650f40

Technology Research
November 4, 2013

IT Systems & Networking
October 2013 Cisco VAR Survey

Jayson Noland, CFA
jnoland@rwbaird.com
415.364.3343

Kimberly Evers
kevers@rwbaird.com
415.364.3347

Please refer to Appendix - Important Disclosures and Analyst Certification on
Page 18

Baird – October 2013 Cisco VAR Survey

0

Profile of Survey Sample
 Sample size: 84 survey participants (predominantly within the Enterprise and
Commercial verticals)
 Revenue profile: ~$10 billion in estimated annual Cisco product sales

 Cisco Partner Status: 49% Gold, 21% Premier, 10% Select, 11% Silver, and
8% Other/NA
 Cisco sales represent ~33% of the average respondent’s total annual revenue
Total Annual Firm Revenue
22

Geographic Distribution
22

100%
90%

17

0%

4%
12%

22%

80%

14

70%

24%
APAC (Asia Pacific)

60%

9

CALA (Latin America)

50%
40%
30%

<$10

$10-$50

$50-$100

$100 - $250

>$250

77%

EMEA (Europe, Middle
East, Africa)

61%
AMER (North America)

20%
10%

$ in millions
Source: Robert W. Baird & Co.

0%
Unweighted

Revenue Weighted

* Weighted by Cisco product sales, not total firm revenue


1

FQ1 Cisco Product Sales

“How would you characterize your Cisco product sales during AUGUST - OCTOBER (Cisco's Fiscal
Q1)?”
 Regarding Cisco’s FQ1, 35% of respondents cited a “Better Than Plan” quarter, 39% noted an “In-Line” quarter, and 26% cited a
“Below Plan” quarter.
 The net score of 8% declined QoQ as expected, and looks healthy versus historical FQ1 responses in our survey.
Sales relative to expectations - Survey History
Net Score
40%
30%

Sales relative to expectations - Survey FQ1 History
15%
10%

20%

5%

10%

0%

0%
-10%
-20%

-5%

Net Score 5-Year Avg

-10%

-30%

-15%

-40%

-20%

-50%

5-Year Avg

-25%
FQ1'09 FQ1'10 FQ1'11 FQ1'12 FQ1'13 FQ1'14

FQ1'14: 84 responses


Source: Robert W. Baird & Co; Note: Net Score is Defined as "Above Plan" responses - "Below Plan"

Source: Robert W. Baird & Co; Note: Net Score is Defined as "Above Plan" responses - "Below Plan"

Responses

Responses

Commentary:
 “Big deals dominate the performance.” (>$250M)
 “Momentum has slowed a bit since Q4.” (>$250M)
 “Typical cyclic trend, quieter start to the year after the push to close the previous financial year.” (>$250M)

 “We have a renewed focus on Cisco that has accelerated our Unified Communications and Data Center business. We believe Cisco is a growth engine.” (>$250M)
 “Hockey stick in October.” ($100M-$250M)
 “Strong growth. Customers are moving on projects.” (>$250M)
 “Pretty much as expected, soft at the end of Aug, but that is typical seasonality.” (>$250M)
 “I used to joke that a few years ago, Cisco was the 800 lb. gorilla asleep in the corner. Well, Cisco woke up. Over the last several quarters, Cisco has been
everywhere and very aggressive on pricing. Cisco has also been bundling very successfully.” (<$50M)
 “India market still depressed.” (<$50M)


2

FQ1 Cisco Product Sales by Geo and Size

“How would you characterize your Cisco product sales during AUGUST - OCTOBER (Cisco's Fiscal
Q1)?”
 While the North American net score declined QoQ (in line with seasonality), it is still well above the five-year historical average
FQ1 for the region.
 The Europe net score also declined QoQ (in line with seasonality), but is now above the five-year historical average FQ1 for the
geography.
 Large VARs (>$100 million), achieved a net score still well above the FQ1 historical average for the cohort. Based on
conversations with respondents, we believe Large VARs continue to take share from smaller, regional VARs.

Sales relative to expectations by Geography
North America

Sales relative to expectations by VAR Size

Europe

60%
40%
20%

Small VARs (<$100 million revenue)

Large VARs (>$100 million revenue)

80%
60%

40%
20%

0%

0%
-20%

-20%

-40%

-40%

-60%

-60%

FQ1'14: North America - 51 responses. Europe - 20 responses. Rest of World - 13 responses.
Percentage shown is the differential between 'above expectations' and 'above expectations'


FQ1'14: North America - 51 responses. Europe - 20 responses. Rest of World - 13 responses.
Percentage shown is the differential between 'above expectations' and 'below expectations'
Source: Baird July 2013 Cisco VAR Survey

3

Cisco FQ2 Outlook

“What are your expectations for your Cisco product sales for NOVEMBER - JANUARY (Cisco's Fiscal
Q2) relative to normal seasonality?”
 Regarding expectations for Cisco’s FQ2 outlook, 42% of respondents expect a “Better Than Seasonal” quarter, 46% expect
“Normal Seasonality,” and 12% expect a “Worse Than Seasonal” quarter.
 The overall net score for the FQ2 outlook was the highest ever for the January quarter in the five years of this survey.
Next-quarter outlook - Survey History
Net Score
60%

Next-quarter outlook - FQ4 Survey History
30%
25%

40%

20%

20%

15%

0%

10%

Net Score
5-Year Average

5%

-20%

0%

-40%

-5%
-60%

-10%
FQ1'09
Source: Robert W. Baird & Co; Note: Net Score is Defined as % of "Better than Seasonal" responses - % of
"Worse than Seasonal" Responses

FQ1'10

FQ1'11

FQ1'12

FQ1'13

FQ1'14

Source: Robert W. Baird & Co; Note: Net Score is Defined as % of "Better than Seasonal" responses - % of
"Worse than Seasonal" Responses

Commentary:
 “Usually a slower time frame but strong pipeline might make this a good qtr.” (<$50M)

 “Large projects will support above-average growth into next quarter.” ($50M-$100M)
“This period is typically our largest Cisco quarter. We are looking at somewhere between 30% and 40% growth YoY.” (>$250M)
 “Pipeline is up Year over Year.” (>$250M)
 “More concerned about macro economics, like the government debt ceiling affecting our business; otherwise normal.” (>$250M)
 “Lots of DC projects and wireless is heating up.” ($50M-$100M)
 “Slowing UCS pipe.” (>$250M)
 “Pipeline for calendar year-end is stronger than normal seasonality.” ($100M-$250M)


4

Cisco FQ2 Outlook by Geo and VAR Size

“What are your expectations for your Cisco product sales for NOVEMBER - JANUARY (Cisco's fiscal
Q1) relative to normal seasonality?”
 Respondents from North America continue to fare better than Europe. The net score for North America remains well above the fiveyear FQ2 average, while Europe remains slightly below the historical average.
 We note our survey underweights emerging markets, which was recently cited as an area of softness for Cisco.

Sales outlook by Geography
North America

Europe

60%
40%
20%

0%
-20%
-40%
-60%

FQ1'14 Survey: North America - 51 responses. Europe - 20 responses. Rest of World - 13 responses.
Percentage shown is the differential between 'better than normal' and 'worse than normal'


5

Impact of Recent Restructuring
“Has Cisco’s recent restructuring had any impact on your Cisco business?”

 Most respondents cited no impact from the recent (4,000 headcount) reduction at Cisco.
 We note of those citing an impact, a disproportionate amount are coming from the Small VAR category and the Asia region.
Has Cisco's recent restructuring had any impact on your Cisco business?

Yes
23%

No
77%

Source: Baird October 2013 Cisco VAR Survey
Based on 83 responses

Commentary:
 “A few deck chairs need to be backfilled or shared, but nothing important.” (>$250M)
 “Too early to tell but I would expect no negative impact.” (>$250M)
 “Lost some key people that we have worked with for years.” ($100M-$250M)
 “Restructure in conjunction with industry challenges and economic uncertainty.” (>$250M)
 “There's been a loss of momentum on the Channels support side. This has stalled some deals.” ($100M-$250M)
 “No impact as of yet, but I hear there are still many layoffs to be done.” ($100M-$250M)
 “Have not seen much impact yet, although some decision making processes have taken longer than usual and there has been an additional level of oversight.” (>$250M)
 “This has had a minor disruption on our coverage, but the focus on minimizing disruption seems high. It will not reflect our results.” (>$250M)
 “Things are going OK. The Cisco restructuring is very noticeable, there’s tremendous pressure in the field – a lot of intimidation or hard line attitude coming from Sales management.
A lot of people are scratching their head and saying why did they have to lay off 4,000 people. It’s almost like they wanted to create this image to Wall Street that they’re lean and
mean.” (>$250M)

 “More difficult for you to locate personnel.” (<$50M)


6

Aggressive Pricing by Cisco

“Have you seen any abnormal pricing aggression from Cisco in the quarter?”
 Overall, most respondents did not cite aggressive pricing from Cisco in the quarter; this figure continues to improve over the last two quarters
(68% cited “No” in FQ3’13, 70% in FQ4’13).
 Of those that responded “Yes”, we continued to observe a higher proportion of European respondents, and now also Asian respondents that cited
pricing pressure.
 Small VARs continue to be more likely than Large VARs to witness aggressive pricing behavior from Cisco.

Have you seen any abnormal pricing pressure by Cisco in the quarter?
Yes
25%

No
75%


Commentary:
 “Too many partners and Cisco still driving close with discount not solutions.” (<$50M)
 “Seen lower pricing competition from HP in switching, which is putting pressure on Cisco.” (<$50M)

 “HP Networking took a major deal over Cisco recently. HPN came in with a better price, and everything is LPTA (Lowest Price, Technically Acceptable) in the Federal
government right now.” ($50M-$100M)
 “High pressure with gray market pricing - in the market a lot of discussions with customers about pricing” (<$50M)
 “I have found we are competing with refurbished Cisco product.” (<$50M)


7

Cisco & Competitive Dynamics

“Is Cisco currently facing serious competition from any of the following vendors in the switching market?
(Multiple answers accepted)”
 HP Networking continues to rank as the most serious competitor to Cisco, but qualitative conversations lead us to believe HPN has lost
significant momentum.
 We view Arista as the strongest data center competitor to Cisco currently – we note Arista doesn’t yet have comparable breadth in
channel relationships.
Cisco's most significant competitor in the Data Center Switching market?

Cisco's most significant competitor in the Campus Switching market?

HP Networking

HP Networking

Juniper

Juniper

Brocade

Brocade

Arista

No significant competition

No significant competition

Extreme

Huawei

Dell/Force10

Dell Force10

Huawei

Extreme

Arista

Other

Other
0

10

20

30

40

50

0


40

60


Based on 83 responses; multiple responses accepted

20


Commentary:
 “HP seems to be the only company with the strength, size, presence and cost structure to impact Cisco.” (>$250M)
 “Our Juniper business is flat. We had a great year last year, so flat isn’t necessarily bad. We lost a couple of very, very large deals against Cisco. A lot of the quality issues around
SRX and JUNOS are in the past. The CEO at Juniper before Kevin used to say that on one end of the spectrum is Cisco, and on the other is point players. Juniper wanted to be in the
middle. They kind of are in the middle now. They aren’t known for anything.” (<$50M)

 “Overall, I’d say HP is slowly moving in the right direction; the key words are slowly and right. HP Networking has a very specific place, which is basically Public Sector.”
(>$250M)
 “At least in India, presence and acceptance of other players are negligible.” (<$50M)
 “HP Networking has fallen on its face. I only have two sales reps that act like they want to work with HPN. I don’t even know who my HP Networking channel person is
anymore. Their whole value-prop is being cheaper than Cisco… and free maintenance…but what does that mean long-term? It’s a bit of a savings now versus pain later.”
(>$250M)
 “Juniper’s wireless product is nothing. It’s not like the SRX where it has technical issues, but it’s just not competitive relative to Aruba, Cisco, or Meraki.” (<$50M)
 “We are pretty excited about Arista. A Cisco veteran in our area just joined them. He’s a rainmaker. Their architecture makes a lot of sense to me, and they have a great
management team.” (<$50M)
 Arista is the other one that apparently has a pretty compelling offer. My engineers say Arista’s 10GBASE offering is very compelling.” (>$250M)
 “We hear a lot of noise about competitors, but as Juniper and HP have continued to decline, customers seem to be back on board with Cisco solutions.” (>$250M)


8

Cisco Demand by Product

“How would you describe demand trends for the following Cisco products currently?”
 We’ve asked a similar question on Cisco products for five quarters. Data Center Switch, UCS, and Core Routing have
consistently scored at the top. WAN optimization and Collaboration continue to score at the bottom.
 In this quarter, we asked about Core versus Edge Routing and Switching separately; we note the net scores for Edge were
significantly lower than Core.
 Network Security has edged up in this survey, while ISE has fallen in the rankings.
Cisco Product by Demand - FQ1
Strong

Weak

DC Switch
UCS
Core Route
WLAN
Network Security
Edge Switch
Edge Route
Collaboration
ISE
WAN Optimization
-125

Very Strong
Healthy
OK
Muted
Very Weak

-25

75

175

Based on 83 responses; chart depicts a net score in which 'Very Strong' = *3, 'Solid' = *2, 'OK' = *1, 'Muted' = *-2, and 'Very Weak' = *-3

Commentary:
“Riverbed and F5 are taking the WAAS and ACE business...” (>$250M)
“Increase attributed to Data Center / UCS initiatives.” ($100M-$250M)
“Lots of DC projects and wireless is heating up.” ($50M-$100M)
“We’ve definitely seen an uptick in major core Cisco products over the last six months. Customers are looking at Meraki and trying to figure out how much of that makes sense for
them. If I were to bet on a product line at Cisco that will explode over the next 18 months, it would be Meraki. I think Cisco understands the opportunity and has a very specific
plan.” (>$250M)
“UCS is wood behind the iron for sure. Cisco has the right pricing, tactics, and message with this product. It’s a very strong play.“ (>$250M)
“Continued growth in DC/UCS and ISE technology.” ($100M-$250M)
“Innovation in the Collaboration space is desperately needed. Cisco is totally missing it with no real identifiable strategy on Enterprise Social Applications and Social customer care
solutions.” ($100M-$250M)
“Slowing UCS pipe.” (>$250M)
 “ISE is getting a lot of traction.” ($100M-$250M)


9

SDN Adoption
“When do you expect to see mainstream enterprise adoption of SDN? (Multiple answers accepted)”
 Almost 70% of respondents expect SDN to achieve mainstream enterprise adoption within the next two years, which was faster than
we would have expected.
 We note during conversations with resellers, most indicated a lack of consensus of what a typical SDN deployment would look like.
When do you expect SDN to see mainstream enterprise adoption?
6 months
1%
1 year
24%

Never
7%
4+ years
10%

3 years
14%

2 years
44%

Commentary:

 “Most are still trying to realize the true business case for SDN” (>$250M)
 “I seriously doubt that application vendors will develop software depending on the network vendor.” (<$50M)
 “SDN is a difficult theme in the real life.” (<$50M)
 “Without unified adoption of a single set of standards and practices by ALL service providers (good luck), SDN will evolved to mean Next Generation Network Management
for the enterprise.” (>$250M)
 “There is a trend in this direction and interest to learn more, but the path for customers is unclear. Partners are still separating the marketing from the real
value/opportunity.” (>$250M)
 “Vaporware.” ($50M-$100M)
 “Other than VMware, I don't see anyone talking about it.” (>$250M)
 “Cisco and VMware have two competing visions. There is no clear winner today.” ($100M-$250M)


10

Key SDN Features
“Which SDN features will customers find most compelling? (Multiple answers accepted)”
 “Automated provisioning and configuring” ranked No. 1, followed by “Network management and orchestration,” and “Layer 4-7
services.”
 We note at a recent ONUG (Open Networking User Group) event, L4-7 services was most popular by vote. (Please see our Industry
Note detailing this event for more details.)
Which SDN features will customers find most compelling?
Automated provisioning and configuring
Network management and orchestration
Layer 4-7 services (Security, load balancing etc)

Network monitoring
Increased scalability (breaking 4K VLAN limit)
Traffic shaping
Not sure yet

Other
0

20

40

60


Other responses include: “Application programmability”, “Centralized policy management”, “Vendor Independence”
Commentary – Insieme:
 “Focus will be on benefits of hardware defined networking versus SDN. No impact of Insieme as yet. Expect customer questions after launch next month.” ($100M-$250M)
 “I wonder if EMC has a take on that which could have more of an effect.” (<$50M)
 “Seeing it the field now. Insieme is the path forward in the data center. Cisco needs a good migration strategy.” (>$250M)
 “Insieme is not GA yet so no field traction but Cisco's approach to Application Centric SDN should position them for a more broad conversation and opportunity than the
approach many others are taking.” (>$250M)
Commentary – competitive landscape:
 “Cisco is the leading vendor in SDN.” (<$50M)
 “Juniper’s SDN seems to be the real deal from what we can tell at this point. We have a large bid out now. I feel like they really accelerated things with Contrail, and they
seem to be somewhat at the forefront.” (<$50M)
 “We feel that [it] is theirs to lose” [re: Cisco] (>$250M)
 “Adoption of VMware centric solutions will be tough competition for Cisco.” ($50M-$100M)


11

WHIPTAIL Acquisition
“Do you expect Cisco’s acquisition of WHIPTAIL to impact its relationship with its storage partners
within the next year?”
 Slightly over 30% of respondents expect no impact to either EMC or NetApp within the next year.
 Only 16% and 12% expect a meaningful impact to EMC and NetApp, respectively, in the next year.
 Qualitative feedback suggests some skepticism that this is Cisco’s first and last move into storage.
WHIPTAIL acquistion to impact Cisco's relationship with EMC (in the next year)?
Yes meaningful
impact
16%

Yes - slight
impact
53%

WHIPTAIL acquistion to impact Cisco's relationship with NetApp (in the next year)?
Yes meaningful
impact
12%

No impact
31%

No impact
32%

Yes - slight
impact
56%





Commentary:
 “We believe that Cisco is not aiming for the storage market. Whiptail's technology will be leverage in upcoming UCS servers as well as in future switching products.” (>$250M)
 “This will of course cause some issue with Storage partners.” ($50M-$100M)
 “Cisco messaging is that Whiptail will be UCS only not a storage play.” (>$250M)
 “Both Cisco and EMC have made public statements to partners on strategic directions and Cisco/EMC partnerships.” ($100M-$250M)
 “Cisco says it is not a competitive move, but we will see.” (>$250M)
 “All Flash Storage will become a reality soon and thus will move all IT vendors to offer customized application integrated solutions.” ($50M-$100M)
 “Anxiously awaiting to hear what products will be available.” ($100M-$250M)
 “I think it is just the beginning.” (>$250M)
 “I believe this is a strong acquisition by Cisco and a vision into Cisco changing the game in the market.” ($50M-$100M)
 “As we understand the intended implementation will only complement SAN providers, not compete on a large scale.” (>$250M)


12

Virtual ADC Solutions

“In the Enterprise segment, have you seen deals go virtual in ADC?”
 Roughly 27% of respondents cited virtual ADC deals, including some large VARs.
Within the Enterprise segment, have you seen ADC deals go virtual?

Within the Enterprise segment, have you see

Yes
27%

No
73%


Commentary on Vendors:
 “ADC for a while on the virtual front.” (>$250M)
 “I believe Riverbed is struggling in Federal. The OPNET integration is not going well and they are seeing a lot of attrition within their Federal sales organization. To save money, they
are cutting corners on compensation, which is causing additional attrition in Federal.” ($50M-$100M)
 “We had a great year with Riverbed last year, so it’s tough to compare. Our business is solid right now, but still below where we were last year. We are seeing some traction in other
product lines, like Granite and Stingray. With Granite, Riverbed has done a good job of providing support to partners for Granite.” (<$50M)
 “F5 doing better .” (>$250M)
 “Riverbed is overwhelmingly strong. Cisco lost contact to the market leader.” (<$50M)
 “I don't see much of either.” (>$250M)
 “Seeing a slight uptick in Riverbed interest/opportunities.” ($100M-$250M)
 “Riverbed growing stronger. F5 seems to be treading water.” (>$250M)
 “Both F5 and Riverbed have made great advances in mindshare over the past 18 months.” (>$250M)
 “Riverbed seems to be in tailspin. F5 and Citrix seem to be winning share.” (>$250M)
 “F5 is strong.” ($50M-$100M)
 “F5 was awarded a multi-million portion of a major networking and security deal within a Federal agency. The F5 portion was for load balancing. We thought A10 would be able to
knock F5 off but apparently not.” ($50M-$100M)


13

APT Security

“Within the Advanced Persistent Threat (APT) market, who is seeing the most success? (Multiple
responses accepted).”
 We continue to see Palo Alto Networks as the most popular APT vendor cited by channel respondents (consistent with our April 2013
survey)
 We also hear FireEye has a leading APT solution that is generating significant customer interest – we note FireEye is likely underdistributed
Within the APT (Advanced Persistent Threat) market, who is seeing the most success?
Palo Alto Networks - WildFire
FireEye

Check Point - ThreatCloud Emulation Service
Fortinet - FortiGuard Cloud-Based Sandboxing Service
Sourcefire - FireAMP
Trend Micro - Deep Discovery
Other
0

10

20

30

Based on 73 responses in aggregate; multiple responses accepted

Commentary on APT:
 “FireEye and Sourcefire seem to be close with Palo right behind.” (>$250M)
 “Our view is that most customers will require an complete integrated solution (i.e., multivendor) leveraging Big Data & SDN to minimize the overall attack footprint.” (>$250M)
 “Though Checkpoint is a renowned name other vendors like Fortinet and Trend Micro are catching up very fast.” (<$50M)
 “We are not seeing significant demand for APT yet.” ($100M-$250M)
 “APT vendors and customers need to settle on a common definition of what APT is before a real market leader can be determined.” (>$250M)
 “[Chose Sourcefire for best APT] Cisco acquisition.” ($50M-$100M)
Commentary on security vendors:
 “I’m seeing nothing with Fortinet. I see them in only one government agency. I don't know how they have a sales team quite frankly.” ($50M-$100M)
 “Blue Coat has won a few large deals with their new Solera acquisition. We see future opportunity there.” ($50M-$100M)
 “Palo Alto is not quite growing as quickly as I would have hoped. We have a decent funnel though. People love the value prop. Their channel is still not fully built out. At the end of
the day, it doesn’t sell itself. Still, we are bullish...it’s an expensive product, sometimes double a firewall. Palo Alto does it the most cleanly and efficiently in one box, but I hear
anecdotally some customers struggle with the ROI because they already have IPS and firewall.” (<$50M)
 “Traction with Fortinet has not improved. Part of it might be that we are a Juniper-centric shop. We are still committed to Fortinet and like their boxes, but they are completely
transactional. They are running 200 mph everywhere trying to pick up $15K-$25K deals everywhere.” (<$50M)


14

Emerging Technologies and Vendors
Private Networking Companies Mentioned Recently by VARs:

A10 Networks

ADARA Networks

Aerohive

AirWatch

Arista Networks

Astute Networks

Barracuda Networks

Blue Cat Networks

Certeon

Damballa

Embrane

Exinda

FireEye

ForeScout Technologies

Glue Networks

Kemp

MobileIron

PLUMgrid

Silver Peak

Vidyo


** This is a compilation of companies named in our recent Cisco Reseller Surveys
Images from company websites and www.digitizor.com.

15

Recommendation on CSCO Stock
Maintain Outperform Rating (CSCO-$22.57-Outperform)
 Trading at ~11x C14E EPS (~8x ex-cash), we continue to find CSCO’s current valuation attractive given the company’s
strong execution, attractive product portfolio and competitive position. We also believe SDN adoption will develop gradually
and Cisco will be a key player in the market for more programmable solutions.
 We continue to believe that sustained momentum in the marketplace, combined with a better investor appreciation for
Cisco’s role in SDN, could support a low- to mid-teens multiple for CSCO (as seen prior to the 2011 restructuring). We note
that Cisco is still trading at a below-market multiple.
CSCO: 3-Yr P/E Ratio

CSCO: 1-Yr P/E Ratio

16.0x

14.0x

14.0x

13.0x

12.0x

12.0x

10.0x

11.0x

8.0x

10.0x

6.0x

9.0x

4.0x

8.0x

P/E

Med + σ

Med - σ

Source: FactSet; (P/E multiples are b ased on current fiscal year EPS.)

Median

P/E

Med + σ

Med - σ

Median

Source: FactSet; (P/E multiples are b ased on current fiscal year EPS.)

Risks include: macroeconomic slowdown, increased competition, pricing and margin pressure, increasing contribution from lowermargin products (UCS), foreign exchange and tax rate changes, longer-term threat of new architectures, such as SDN, and
acquisition/restructuring risks.
(See recent research reports for more information.)


16

Company

Rating

Price
Target

Price
10/31/13

Performance
YTD
LTM
%
%

Rev

EPS
YoY %

Net Cash

$1.81
3.34
2.55
(1.06)
3.59
1.79

6%
17%
14%
(30%)
(10%)
22%

$4.76
12.47
11.36
0.20
(5.90)
(17.80)

17,466
5,837
5,084
180
13,251
350

$1.93
0.86
4.49
1.00
0.12
0.53
0.67

$2.07
1.23
4.66
0.97
0.31
0.46
0.73

7%
44%
4%
(2%)
170%
(13%)
9%

$6.33
5.97
16.16
(0.01)
5.70
4.99
0.41

$50,610
4,034
1,271
521
437
841
790

$8.03
10.35

$5.08
8.21

(37%)
(21%)

($0.68)
$9.69

2,521
4,309

C12

C13E

C12

C13E

C12

C13E

C12

C13E

YoY %

$51,202
34,884
14,085
401
50,492
3,790

14x
28x
18x
NM
6x
15x

13x
24x
15x
NM
7x
12x

$2.32
4.17
2.98
NM
3.69
1.61

$2.55
4.91
2.83
NM
3.96
2.30

6x
16x
8x
NM
4x
9x

6x
14x
9x
NM
6x
8x

1.9x
6.4x
1.6x
5.3x
0.5x
0.7x

1.8x
5.7x
1.5x
3.1x
0.6x
0.6x

$21,714
4,605
6,297
73
119,239
10,128

$23,187
5,191
6,477
124
110,886
10,820

7%
13%
3%
68%
(7%)
7%

$1.70
2.85
2.23
(1.52)
3.99
1.47

32%
12%
(4%)
(19%)
(24%)
2%
52%

$122,686
9,399
6,249
2,506
3,215
3,331
3,716

12x
22x
18x
15x
NM
37x
12x

11x
15x
17x
15x
NM
43x
11x

$2.01
0.58
5.94
1.30
1.01
1.00
1.07

$2.17
0.43
5.95
1.79
1.33
0.79
0.83

6x
7x
9x
10x
NM
18x
6x

6x
6x
9x
11x
70x
22x
7x

1.9x
1.5x
3.5x
3.0x
8.9x
4.8x
1.6x

1.8x
1.4x
3.3x
2.4x
6.1x
4.2x
1.6x

$47,062
4,365
1,420
840
311
523
2,256

$49,400
4,619
1,511
1,047
453
598
2,189

5%
6%
6%
25%
46%
14%
(3%)

62%
64%

80%
104%

$18,253
16,974

6x
7x

10x
9x

$6.59
9.29

$5.80
8.51

4x
4x

9x
7x

1.1x
0.9x

1.3x
1.0x

$16,332
15,648

$13,999
15,138

(14%)
(3%)

24%
30%
30%
16%

25%
32%
34%
17%

17.3x

16.2x

SP50:

$101.99

$108.73

7%

26.5x

19.9x

RUT:

$41.48

$55.38

34%

$32
95
42
8
25
25

$23.65
80.75
39.14
6.10
25.92
22.05

(7%)
(14%)
17%
(32%)
82%
30%

(3%)
(5%)
45%
NA
87%
NA

Data Networking
Cisco (CSCO)
Juniper (JNPR)
F5 (FFIV)
Riverbed (RVBD)
Palo Alto Networks (PANW)
Fortinet (FTNT)
Brocade (BRCD)

O
N
O
N
O
N
N

$30
22
110
15
60
24
8

$22.57
18.48
79.43
14.95
41.93
19.75
8.06

15%
(6%)
(18%)
(24%)
(22%)
(6%)
51%

Hard Disk Drives
Seagate (STX)
Western Digital (WDC)

N
N

$45
67

$49.20
69.85
$1,761.64
$3,922.04
$1,100.15
$82.28

IYW-US

EV/Rev

C13E

O
N
N
N
N
N

SP50

EV/EBITDA

C12

IT Solutions
EMC Corp (EMC)
VMware (VMW)
NetApp (NTAP)
Violin Memory (VMEM)
Hewlett Packard (HPQ)
CDW Corp (CDW)

Indices
S&P 500
NASDAQ
Russell 2000
DJ US Tech Index Fund

FCF/share

PE
Mkt
Cap

C12

C13E

Note: $ in millions except per share information.
Note: CDW performance based on IPO priced at $17.00 on 6/27/13.
Note: VMEM performance based on IPO priced at $9.00 on 9/27/13. VMEM net cash figure is based on pro forma cash (includes net IPO proceeds).
Source: Public company filings and Robert W. Baird & Co. estimates.

(See recent research reports for more information.)


17

Cash

Appendix – Important Disclosures and Analyst
Certification
1 Robert W. Baird & Co. Incorporated makes a market in the securities of CSCO.


18

Certification
Robert W. Baird & Co. Incorporated and/or its affiliates expect to receive or intend to seek investment-banking related compensation
from the company or companies mentioned in this report within the next three months.
Robert W. Baird & Co. Incorporated may not be licensed to execute transactions in all foreign listed securities directly. Transactions in
foreign listed securities may be prohibited for residents of the United States. Please contact a Baird representative for more information.
Investment Ratings: Outperform (O) - Expected to outperform on a total return, risk-adjusted basis the broader U.S. equity market
over the next 12 months. Neutral (N) - Expected to perform in line with the broader U.S. equity market over the next 12 months.
Underperform (U) - Expected to underperform on a total return, risk-adjusted basis the broader U.S. equity market over the next 12
months.
Risk Ratings: L - Lower Risk - Higher-quality companies for investors seeking capital appreciation or income with an emphasis on
safety. Company characteristics may include: stable earnings, conservative balance sheets, and an established history of revenue and
earnings. A - Average Risk - Growth situations for investors seeking capital appreciation with an emphasis on safety. Company
characteristics may include: moderate volatility, modest balance-sheet leverage, and stable patterns of revenue and earnings. H Higher Risk - Higher-growth situations appropriate for investors seeking capital appreciation with the acceptance of risk. Company
characteristics may include: higher balance-sheet leverage, dynamic business environments, and higher levels of earnings and price
volatility. S - Speculative Risk - High-growth situations appropriate only for investors willing to accept a high degree of volatility and
risk. Company characteristics may include: unpredictable earnings, small capitalization, aggressive growth strategies, rapidly changing
market dynamics, high leverage, extreme price volatility and unknown competitive challenges.
Valuation, Ratings and Risks. The recommendation and price target contained within this report are based on a time horizon of 12
months but there is no guarantee the objective will be achieved within the specified time horizon. Price targets are determined by a
subjective review of fundamental and/or quantitative factors of the issuer, its industry, and the security type. A variety of methods may
be used to determine the value of a security including, but not limited to, discounted cash flow, earnings multiples, peer group
comparisons, and sum of the parts. Overall market risk, interest rate risk, and general economic risks impact all securities. Specific
information regarding the price target and recommendation is provided in the text of our most recent research report.


19

Certification
Distribution of Investment Ratings. As of October 31, 2013, Baird U.S. Equity Research covered 713 companies, with 50% rated
Outperform/Buy, 49% rated Neutral/Hold and 1% rated Underperform/Sell. Within these rating categories, 16% of Outperform/Buyrated and 10% of Neutral/Hold-rated companies have compensated Baird for investment banking services in the past 12 months
and/or Baird managed or co-managed a public offering of securities for these companies in the past 12 months.
Analyst Compensation. Analyst compensation is based on: 1) The correlation between the analyst's recommendations and stock
price performance; 2) Ratings and direct feedback from our investing clients, our institutional and retail sales force (as applicable)
and from independent rating services; 3) The analyst's productivity, including the quality of the analyst's research and the analyst's
contribution to the growth and development of our overall research effort and 4) Compliance with all of Robert W. Baird’s internal
policies and procedures. This compensation criteria and actual compensation is reviewed and approved on an annual basis by
Baird's Research Oversight Committee.
Analyst compensation is derived from all revenue sources of the firm, including revenues from investment banking. Baird does not
compensate research analysts based on specific investment banking transactions.
A complete listing of all companies covered by Baird U.S. Equity Research and applicable research disclosures can be accessed at
http://www.rwbaird.com/research-insights/research/coverage/research-disclosure.aspx. You can also call 1-800-792-2473 or write:
Robert W. Baird & Co., Equity Research, 24th Floor, 777 E. Wisconsin Avenue, Milwaukee, WI 53202.
Analyst Certification
The senior research analyst(s) certifies that the views expressed in this research report and/or financial model accurately reflect such
senior analyst's personal views about the subject securities or issuers and that no part of his or her compensation was, is, or will be
directly or indirectly related to the specific recommendations or views contained in the research report.
Disclaimers
Baird prohibits analysts from owning stock in companies they cover.
This is not a complete analysis of every material fact regarding any company, industry or security. The opinions expressed here
reflect our judgment at this date and are subject to change. The information has been obtained from sources we consider to be
reliable, but we cannot guarantee the accuracy.
ADDITIONAL INFORMATION ON COMPANIES MENTIONED HEREIN IS AVAILABLE UPON REQUEST
The Dow Jones
Industrial Average, S&P 500, S&P 400 and Russell 2000 are unmanaged common stock indices used to measure and report
performance of various sectors of the stock market; direct investment in indices is not available.


20

Certification
Baird is exempt from the requirement to hold an Australian financial services license. Baird is regulated by the United States Securities
and Exchange Commission, FINRA, and various other self-regulatory organizations and those laws and regulations may differ from
Australian laws. This report has been prepared in accordance with the laws and regulations governing United States broker-dealers
and not Australian laws.
Copyright 2013 Robert W. Baird & Co. Incorporated
Other Disclosures
The information and rating included in this report represent the Analyst’s long-term (12 month) view as described above. The research
analyst(s) named in this report may at times, discuss, at the request of our clients, including Robert W. Baird & Co. salespersons and
traders, or may have discussed in this report, certain trading strategies based on catalysts or events that may have a near-term impact
on the market price of the equity securities discussed in this report. These trading strategies may differ from the analysts’ published
price target or rating for such securities. Any such trading strategies are distinct from and do not affect the analysts’ fundamental longterm (12 month) rating for such securities, as described above. In addition, Robert W. Baird & Co. Incorporated and/or its affiliates
(Baird) may provide to certain clients additional or research supplemental products or services, such as outlooks, commentaries and
other detailed analyses, which focus on covered stocks, companies, industries or sectors. Not all clients who receive our standard
company-specific research reports are eligible to receive these additional or supplemental products or services. Baird determines in its
sole discretion the clients who will receive additional or supplemental products or services, in light of various factors including the size
and scope of the client relationships. These additional or supplemental products or services may feature different analytical or research
techniques and information than are contained in Baird’s standard research reports. Any ratings and recommendations contained in
such additional or research supplemental products are consistent with the Analyst’s long-term ratings and recommendations contained
in more broadly disseminated standard research reports.
UK disclosure requirements for the purpose of distributing this research into the UK and other countries for which Robert W.
Baird Limited holds an ISD passport.
This report is for distribution into the United Kingdom only to persons who fall within Article 19 or Article 49(2) of the Financial Services
and Markets Act 2000 (financial promotion) order 2001 being persons who are investment professionals and may not be distributed to
private clients. Issued in the United Kingdom by Robert W. Baird Limited, which has offices at Mint House 77 Mansell Street, London,
E1 8AF, and is a company authorized and regulated by the Financial Conduct Authority. For the purposes of the Financial Conduct
Authority requirements, this investment research report is classified as objective.
Robert W. Baird Limited ("RWBL") is exempt from the requirement to hold an Australian financial services license. RWBL is regulated
by the Financial Conduct Authority ("FCA") under UK laws and those laws may differ from Australian laws. This document has been
prepared in accordance with FCA requirements and not Australian laws.


21

2e9c7be1 3f75-4abb-bdc3-d868bc650f40

Recomendados

Recomendados

Más contenido relacionado

Similar a 2e9c7be1 3f75-4abb-bdc3-d868bc650f40

Similar a 2e9c7be1 3f75-4abb-bdc3-d868bc650f40 (20)

Más de John Convery

Más de John Convery (9)

2e9c7be1 3f75-4abb-bdc3-d868bc650f40