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Cisco may drop new WAAS appliances after market share thrashing by Riverbed

"Cisco may deemphasize a standalone product line for its WAN optimization solution. May incorporate WAN optimization into its routing portfolio as an added feature set."

Tue, 11/15/11 - 12:55pm    View comments

Last month in Network World, Cisco made quite a splash with its new WAAS appliances announcement:

Cisco unveils next gen WAAS - Hopes juiced up WAN optimization appliances take back share from Riverbed.

However, it now appears that Cisco critic and Network World blogger Larry Chaffin was correct:

The new Cisco WAAS Appliances, a game changer? - New appliances does not mean success for Cisco.

How so?

Well in his note today about Cisco competitor, Riverbed Technology, RBC Capital Markets Managing Director - Mark Sue dropped this thermonuclear bombshell:

Mark SueRBC Capital Markets"Primary competitor Cisco (~23% share) recently revamped its own WAN optimization product and our concerns were that the new product may at the very least delay closure rates for Riverbed.

"Our checks show limited traction with the new product with Riverbed winning a disproportionately high percentage of deals. We further believe that this current WAAS product may be a placeholder product until Cisco ultimately brings WAN optimization inside current products as a feature, enabling further share gains for Riverbed."

Sue continued:

RiverbedCisco"Riverbed is the leader in WAN optimization with ~52% market share as of 2Q11, which has steadily increased from ~31% in 1Q09. The company's primary competitor, Cisco, has seen its market share drop in recent quarters to its recent ~23% and as the exhibit below shows, the gap between the two companies is widening. Riverbed's success comes from its strong win rate for competitive deals, which is in the 90%s, and the recent increase in the number of uncontested deals that Riverbed as won. Riverbed's reach into the WAN optimization channel is becoming larger for Riverbed (95% of revenues is from indirect channel sales)."

Riverbed vs. Cisco WAN Optimization Market Share:

Source: RBC Capital Markets

Sue added:

"Although Riverbed does command the majority of WAN optimization revenues, there may be more share gain opportunities for the company as its largest competitor, Cisco, may deemphasize a standalone product line for its WAN optimization solution. Our take is that Cisco may incorporate WAN optimization into its routing portfolio as an added feature set."

Sue concluded:

"Cisco recently refreshed the hardware for its WAAS family of products, enabling more throughput and a higher number of users per device. The 294, 594 and 694 appliances are for the branch offices and the 694, 7541, 7571 and 8541 appliances are geared towards the large branch offices and data centers. Although this next gen family of WAAS products are an improvement over Cisco's existing line-up, our view is that there wasn't a large upgrade of the software and operating system that runs its products and thus, still not as effective as Riverbed products."

What's your take?

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