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Cisco ousted Hewlett-Packard to become the leader in the global data center infrastructure market, according to a recent report by research firm Canalys.
IBM, Dell and EMC came in at third, fourth and fifth respectively. [1]
Cisco benefited from the growth of data center networking and security, including switches, routers, network security, storage networking and application delivery networking, within the market which boosted it to the numero uno position.
We currently have a $21.21 Trefis price estimate for Cisco, about 15% above the market price.
See our full analysis on Cisco
Data Center Infrastructure: A Vast Market
The worldwide data center infrastructure market grew 2.7 percent to $26.2 billion in the third-quarter 2011 driven by data center virtualization and consolidation, as enterprises expedited cloud adoption, as well as due to data center refresh.
While Industry standard servers continue to remain the biggest part of the market quarter, accounting for 39 percent of total investment and increasing by about 9% in the third quarter, the strongest growth was in server virtualization which rose by approximately 30 percent during the quarter and basically helped Cisco take the lead from HP.
At 25 percent of total investment, storage is the second largest segment in the market followed by Ethernet networking at 21 percent.
Apart from witnessing good growth in its core networking segment, Cisco is also doing well in the important x86 blade server market and is expected to jump from third to second position in the segment by the end of 2012, with only HP ahead of it.
Can Cloud Be A Double Win for Cisco?
As we earlier said, Cisco is turning out to be a big winner in the shift to the Cloud. [2] Not only is the firm seeing the demand for its core networking products shoot up the roof as Cloud adoption picks up, it is also investing heavily in its software capabilities - just like HP - observing that software is going to be a much bigger market than hardware in the Cloud era.
After acquiring AXIOSS Software suite and Versly in August this year, Cisco announced a possible acquisition of BNI Video, a video optimization software company, for $99 million in October. [3]
Cisco is making sure that it has lots to offer on the software front of the Cloud as the adoption picks up.
We are optimistic on Cisco’s outlook and see a 15% upside to current market estimate based on our fundamental valuation model for Cisco.
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Notes:
- Worldwide data center infrastructure investment reaches $26.2 billion, canalys.com [↩]
- See Cisco Will be a Big Winner in Shift to the Cloud [↩]
- Cisco Announces Intent to Acquire BNI Video, Cisco [↩]
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