Here are some highlights that might be relevant to ANET:
*Q4 Revenue: $12.1 billion, down 4% y/y
*Product revenue performance was led by Wireless and Security which increased 5% and 3%, respectively. *NGN Routing and Switching revenue each decreased 9%.
*Service Provider Video, Data Center, and Collaboration revenue decreased 10%, 4%, and 3%, respectively.
*Guidance for Q1 is for revenue to decline between 3% and 1%.
Hmmm. Why is routing and switching down 9% y/y? Could it be that ANET is taking share?
The above article references analyst Tim Long from BMO Capital suggesting that Arista and Juniper took switching market share from Cisco given that both ANET and JNPR grew revenues (51% and 31%, respectively) greater than the market growth rate.
Juniper is my fear point with ANET. Juniper had a superior product, that spiked in the internet bubble and has been pretty much no stock appreciation since then with a market cap, despite business over the last 17 years, at only $10 billion.
Obviously ANET and JNPR are different companies, but they are analogous in many ways. And JNPR is still growing well according to your report and yet the stock is mostly flattish still.
ANET is a more modern company (as Juniper was way back when, when the internet was the disruptive thing vs. the cloud today, and ANET is that “IT” vendor for the cloud as Juniper was for high speed data networks for the internet) and its cache is the ability to combine routing and switching together, amongst other things.
I wonder why juniper’s growth has been stymied for the past decade and a half after an initial huge rush the propelled Juniper, and if ANET may be subject to similar forces going forward or not. What makes ANET different?
Software Defined Networking (SDN) is a different model. Juniper is essentially the same model as Cisco, just faster due to their use of custom ASICs. Juniper started out making really fast routers for ISPs, did well, then moved to the enterprise market, but had much more limited success there.
In my view Juniper produced boxes similar to Cisco’s just more “souped up.”
Arista’s solution is quite different. Whereas Juniper uses custom hardware (and developing one’s own ASICs is about as custom as things get in this space), Arista is happy to run on “merchant silicon” - the exact opposite of developing one’s own chips. This lets Arista move onto new hardware as it becomes available.
The big benefits to SDN include central control, flexible configuration, and superior security, including the ability to isolate things quickly.
I see Arista’s and Juniper’s solution models to be completely different. Juniper is merely a faster Cisco, whereas Arista is a better way to run a network.
Thanks Smorgasbord, that explanation makes a lot of sense. Cisco, when it came to be and dominate was not just better hardware, but software, and so it is with ANET’s EOS.
I don’t know the numbers but I would imagine this would dramatically increase the efficiency and ease of operation of high volume and speed networks.
As such, as you say, it is not just a better plug, but a new way to redesign and deploy your networks. As such, that it gives it far more runway in its TAM that may not be appreciated by the market given the history of this market that I have addressed.
With the Cisco FUD elements surrounding the stock, that explains its valuation as well.
Speaking of networking, does anyone know much about F5 Networks (FFIV)? They seem to be in both the hardware and software business. Motley Fool uses at least two of their products.