ARUN, CSCO, PKT Talk About WiFi, SDN, DPI, Says Stifel

Stifel Nicolaus networking analyst Sanjiv Wadhwani today offered up some thoughts from his road trip through Silicon Valley meeting with Aruba Networks (ARUN), Cisco Systems (CSCO), and Procera Networks (PKT), the latter two of which he rates Buy, while Aruba is a Hold.

Aruba said that wireless LAN products are getting more priority in CIO discussions at companies, in part because of the trend to “bring your own device,” and Wadhwani describes the company’s positioning there:

The company believes that it is likely to see an acceleration in overall WLAN demand. Second, ClearPass is a Trojan horse and is used as a product to �get a foot in the door�. Currently, 25% of ClearPass sales are to non-Aruba customers. Around 80% of these customers are considering Aruba hardware. For every $1 in ClearPass sales, an additional $3 of other Aruba product sales can be sold. Management believes ClearPass is superior to Cisco�s competing identity services engine (ISE) because the ISE has a very basic guest access featureandClearPass has better onboarding of devices. Overall, ClearPass has a strong pipeline, with the ability to install limiting near-term sales.

Aruba also took time to dump on competitor Meraki – “Meraki’s hardware has little value-add and is not as robust in serving large numbers of users — and “mainstream” adoption of the “802.11ac” standard for short-range, broadband WiFi won’t gain traction for a couple years because of its price premium, Aruba believe.

With Cisco, Wadhwani was focused on the phenomenon of “software-defined networking,” which some have said could hurt traditional networking equipment sales and others have said is at this point mere hype.

“Instead of commoditizing its hardware, Cisco believes that SDNs will create more value
for Cisco’s ASICs, operating systems and software-based services,” writes Wadhwani.

The details of SDN, as Cisco sees it, are as follows:

Cisco’s products adhere to the company’s Open Programmable Environment for Networking or Cisco OPEN. Cisco OPEN is intended to open up the network with APIs at layers other than just the data and control plane. Cisco’s SDN architecture harvests network intelligence from the infrastructure, delivers it to an analytics engine which then churns it into orchestration routines for policies, which are then programmed back into the network infrastructure. Cisco says this architecture will apply to all flavors of SDNs – from direct APIs between applications and the network; to controllers governing OpenFlow-enabled devices and other agents; to virtual overlays between applications and the physical and virtual network. The company believes that its strategy of providing software upgrades to its existing switches to make them “SDN ready” is the right strategy. In line with Cisco’s goal of changing the charging mechanism for software, the company is likely to charge for additional licenses on hardware for certain protocols and new class of applications like traffic steering and network slicing. Cisco believes that SDNs will remain a L2-3 technology with L4-7 services likely to ride on top of the infrastructure.