Which of these two fierce competitors looks like a better bet at this juncture?
And if its campus platform ever catches on, that's just a bonus.Cisco's more diversified, less-volatile earnings thus may appeal to the more conservative investor.
Of course, Cisco is much, much bigger than just the data center market, and it's benefiting from years of acquisitions in complementary technologies such as application monitoring and cybersecurity along with steadier service revenue for its installed base.
While it's still the underdog, the numbers indicate Arista is on to something. Meanwhile, Arista, founded in 2004, is the insurgent, having developed a lower-cost, more open-source switch specifically geared for data centers.Cisco has long dominated campus switching for all kinds of enterprises, but Arista, by focusing on products specifically for the changing data center industry -- especially cloud data centers -- has been able to take market share away from industry giant Cisco in the data center segment over the past five years. TTM = trailing 12 monthsPlease give an overall site rating:Moreover, the data center market has now passed the campus switching market in terms of size, and it's also projected to grow much more in the years ahead, while the campus switching market is projected to stay flat.Still, for overall gains, I like Arista's financial strength and long-term growth possibilities much more. Though Cisco's main source of revenue is still its hardware switches, with cybersecurity at 6.5% of revenue and services at 28.3% of revenue, these segments helped limit Cisco's revenue declines to just 8% last quarter, even as core infrastructure hardware fell 15%.While both companies are highly profitable, have net cash on their balance sheets, and return cash to shareholders in the form of buybacks, Arista actually outdoes Cisco on margins and relative balance sheet strength -- surprising for the "smaller" company. Thanks to its smaller scale and its greater exposure to the cloud network data center market, Arista should keep on growing at a faster pace than … Last quarter, Cisco's cybersecurity segment grew 5%, and services grew 5% as well. Though Cisco's main source of revenue is still its hardware switches, with cybersecurity at 6.5% of revenue and services at 28.3% of revenue, these segments helped limit Cisco's revenue declines to just 8% last quarter, even as core infrastructure hardware fell 15%.While both companies are highly profitable, have net cash on their balance sheets, and return cash to shareholders in the form of buybacks, Arista actually outdoes Cisco on margins and relative balance sheet strength -- surprising for the "smaller" company. On the other hand, Cisco also pays a big dividend, which yields 3.2% at today's prices, while Arista doesn't pay any dividend.In the enterprise switching world, Cisco has long been the dominant player, emerging in the 1990s. The first and most obvious difference is the size and scale of Arista vs Cisco. On the other hand, Cisco also pays a big dividend, which yields 3.2% at today's prices, while Arista doesn't pay any dividend.In the enterprise switching world, Cisco has long been the dominant player, emerging in the 1990s.
In fact, since 2012, Arista's dollar-based market share of the data center switching market has grown from 3.5% to 18%, while Cisco's data center market share has declined from 78.1% to 45.9% over that time.Data sources: Company filings and Yahoo! That makes it the better buy today.Thus, while the main hardware business can be volatile, Cisco's portfolio is more diversified, making its results somewhat steadier than Arista's in down markets like this one.This is a tough time to sell switches to large enterprises, but in my eyes, Arista is the better buy today. And, because Cisco’s such a large company, it also has a very large market share. In fact, since 2012, Arista's dollar-based market share of the data center switching market has grown from 3.5% to 18%, while Cisco's data center market share has declined from 78.1% to … Cisco’s been around for more than 30 years, whereas Arista’s only been around since 2004. And if its campus platform ever catches on, that's just a bonus.Cisco's more diversified, less-volatile earnings thus may appeal to the more conservative investor. Of course, Cisco is much, much bigger than just the data center market, and it's benefiting from years of acquisitions in complementary technologies such as application monitoring and cybersecurity along with steadier service revenue for its installed base. TTM = trailing 12 monthsMoreover, the data center market has now passed the campus switching market in terms of size, and it's also projected to grow much more in the years ahead, while the campus switching market is projected to stay flat.Still, for overall gains, I like Arista's financial strength and long-term growth possibilities much more. Though its results are a bit more volatile than Cisco's, Arista is still maintaining high profit margins, it has significant cash on its balance sheet relative to the size of the business, and it appears to have an advantage and longer growth runway in the highest-growth part of the switching universe: the all-important data center.