Hochfeld on ANET

About 3 weeks ago, Arista (NYSE:ANET) reported the results for its second quarter. The results were yet another meaningful beat, including a revenue beat and the shares responded more or less as might have been anticipated and recently made a new high. I had originally written on the company back in March when the shares were at $62. So, over the last 5 months, the shares have appreciated by 24% while the IGV is up by 12%. Decent positive alpha. Over the course of the months since I published my initial article, the company has beaten consensus earnings expectations by reasonable amounts twice - it really has beaten earnings expectations for many quarters now. But earnings expectations haven’t budged in the past several months, and there have been a couple of downgrades. And of course the other day, the International Trade Commission issued what is its seemingly the last judgement against this company and in favor of Cisco (NASDAQ:CSCO) in that company’s on-going dispute alleged infringement of one or more Cisco patents.

The purpose of this article is to lay out an updated positive case for the shares. Most simply put, the company continues to gain share because of product functionality issues that deliver more for the same cost based on the company’s EOS operating system. EOS is the secret sauce Arista has, and at the moment, it remains without a peer. It allows the company to use merchant silicon as part of its manufacturing process, and that has given it a significant amount of flexibility in providing high performance products to the market at more than competitive prices. Because of the company’s technology, it has been able to achieve faster than the market as a whole because its customers are in the hottest networking growth space. And while the issues in terms of infringement are non-trivial, they are unlikely to have more a glancing impact on the company financials and will sooner than later be in the rear-view mirror so to speak. I do not propose to consider the issue of bare metal switches versus branded products in this article, although it is a factor to consider for investors at some point.

Read the entire article at http://seekingalpha.com/article/4002267-arista-continued-cha…

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Thanks for that Matt,