In 2009, Cisco held a 22.5% market share in application delivery controllers (ADC). As of March 2012, Cisco's market share had fallen to only 13.2% (that's a -41.33% decline in 3-years).
Well, last week JMP Securities senior research analyst - internet networking and security equipment, Erik Suppiger, alarmingly revealed in his research note:
"According to IDC, for the March quarter of 2012, Cisco is the third largest provider of application delivery controllers (also referred to as layer 4-7 switching) with 13.2% of the layer 4-7 switching market and F5 is the dominant leader with 45.3% of the market...
"We recently learned that Cisco is advising its sales people to refrain from selling the company's application delivery controller product, the ACE 30 module, for new deployments. We understand this reflects the company's reduced development efforts for the product, which will result in limited feature advancements. However, Cisco will continue to sell and service the product for existing accounts. We also confirmed the company moved its development team for the ACE solution to other areas within the company's data center technologies."
Suppiger added, "We believe this change is an evolutionary development after Cisco's organizational changes that took place in July. At that time, the company eliminated the overlay sales team dedicated to selling application networking technologies, which included the ACE solution, and Cisco started to rely entirely on the company's general sales force to sell the ACE products as well as other application networking technologies. However, we believe Cisco's de-emphasis on selling the ACE for new deployments is a more recent development that reflects more of a shift away from the application delivery controller market. Cisco has been losing market share in the ADC market for several years and we believe this will accelerate the company's share erosion. We also feel that F5, as the strong market leader, will be well positioned to capture a large portion of the share."
Suppiger concluded, "Other players that may benefit include the 2nd largest vendor, Citrix, which controls 16.8%. We also believe privately held A10 Networks, which controls 6.2% of the market, is also well positioned to gain share from Cisco. In light of these developments, we are more confident in our growth assumptions for F5 and believe the company may have an opportunity to exceed them."
Stock Price Comparison: FFIV (F5 Networks) vs. CSCO (Cisco) vs. CTXS (Citrix)
