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BofA analysts told investors in a note Wednesday that Cisco Systems (NASDAQ:CSCO) is “revamping its cybersecurity strategy to leverage structural advantages.”
They have a Buy rating and $52 price target on Cisco. They explained in a research memo that the firm recently had the opportunity to discuss the strategy of Cisco’s End-to-End Security segment with Jeetu Patel, EVP and General Manager of Security and Collaboration, as well as Raj Chopra, Tom Gillis, and Morgan Mann.
They acknowledged that Cisco’s cybersecurity strategy drifted over the last few years, “resulting in market share losses and growth rate fluctuations.”
However, Cisco is now addressing the issues, aiming to simplify the portfolio structure, create a unified experience, focus on five core areas, and create better incentives for sellers and developers, the analysts said.
“Some remedies, such as better messaging, could be addressed in the short term, yet others that require deeper R&D, might improve only in the long run,” wrote the analysts.
They also said Cisco is focusing on a platform approach, but the majority of its security revenues are driven by legacy on-prem solutions, “suggesting a lengthy transition to a recurring model.”
“We expect the company to announce some major product releases in c2H23. Management admits though that while it is a simple concept, execution might prove challenging,” the analysts added.
“One of the objectives of the new management team is to stabilize the growth rate, which had seen great volatility recently due to supply constraints, especially around the firewall business. With SaaS becoming a greater proportion of overall revenue, we expect the company to deliver more consistent and predictable growth.”
