New Security Tech The Key To Cisco's Upgrade At Morgan Stanley

Despite a more than 2-percent decline in Cisco Systems, Inc. CSCO's stock in reaction to its fiscal first-quarter earnings report, analysts at Morgan Stanley remain bullish on the long-term story. The firm's James Faucettemaintains an Overweight rating on Cisco's stock with an unchanged $39 price target.

Key to Cisco's long-term bullish thesis is the company's new security technologies that can exploit SDN concepts and stabilize networking replacement cycles, Faucette argued in a research report. This message was emphasized during the post-earnings conference call where management also made it clear it is focused on transforming the networking business by offering customers a differentiated platform with security and analytics incorporated, such as the Catalyst 9000 series.

Cisco also noted that it gained 22 customers for the Catalyst 9000 in the first four weeks since it was introduced, the analyst continued. The company also saw a 49-percent year-over-year increase in security deferred revenue.

However, products with new architectures much like the Catalyst 9000 will require longer evaluation periods before gaining traction, which in part explains the less-than-stellar performance in the quarter, Faucette added. But as familiarity grows and evaluation cycles shorten the company will no longer report "ho-hum" performance in the security sector.

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