Arista Analyst Day: $2.5B IPO in ’14 for Cisco’s ‘Most Serious Challenger’?
By Tiernan Ray
You don’t have to be a public company to have an annual “analyst day” meeting: privately held Arista Networks of Santa Clara, California, the hot networking startup that competes with Cisco Systems (CSCO), held a meeting yesterday at its headquarters, the third such meeting it has held, with several interested parties from the Street.ISI Group’s Brian Marshall, who has a Hold rating on Cisco, writes today that “Arista remains the fastest growing and most serious challenger” to Cisco.
Marshall thinks the company’s getting ready for a $2.5 billion IPO next year:
Arista will continue to make inroads
in the high-value datacenter switching market driven by a combination of
high-quality management, best-of-breed products and a widening
sales/customer footprint. With the recent new addition of Kelyn Brannon
(CFO), we believe Arista is preparing for a potential IPO in CY14 and
wouldn’t be surprised to see a valuation in the ~$2.5bil range given
revenues are likely to exceed $300mil in CY13 (up ~50% y/y) with an
associated high margin profile. While we expect big things from CSCO’s
new “application-centric” switching platform (i.e., Insieme) which
provides a common policy framework across physical-to-virtual (P2V)
switching infrastructure, we suspect it will be somewhat cannibalistic
on CSCO’s existing Nexus series (e.g., datacenter switches).
JMP Securities‘s Erik Suppiger, who
has a Hold rating on Cisco shares, writes that Arista’s success in the
data center shows just how competitive the equipment market is in that
segment, and that F5 Networks (FFIV) could be a beneficiary:
The company has grown to more than 600
people, has shipped more than a million switch ports, and has more than
2000 customers. We believe Arista is executing well in the switching
market and represents a growing threat to vendors such as Cisco, Brocade (BRCD), and Juniper Networks (JNPR).
While Arista is considerably smaller than the other switch vendors, we
believe Arista has been more successful than Brocade and Juniper in
penetrating the next generation data center switching market, which
management estimates is a $3-5 billion market and is the fastest growing
segment of the switching market. Arista also highlighted its ability to
uniquely partner with complimentary vendors and our offline discussions
suggest that it is working well with F5 among other vendors. In light
of the analyst day, we believe application delivery controllers (ADC)
will be critical to next generation data centers and we reiterate our
Market Outperform on F5. We also believe the data center switching
market is highly competitive and we maintain our Market Perform ratings
on Cisco, Brocade, and Juniper.
