Partners: Cisco Lawsuits Aren't Stopping Arista Networks' Sales Surge
Despite lawsuits from Cisco that could halt the import of Arista Networks' products, Arista reported a whopping 42 percent increase in year-over-year revenues for its fourth fiscal quarter as partners say customers are betting big on the company.
"The [Cisco lawsuits] haven’t entered the minds of the customers at this point and it's certainly not going to result in interrupted service or any major game-changing situations at the customer level," said Andrew Fisher, CEO at Myriad Supply, a New York-based solution provider and Arista partner that's ranked No. 289 on the CRN 2015 Solution Provider 500 list.
"We just got back from the North American Network Operators Group conference in San Diego and there are definitely a lot of folks that absolutely swear by Arista," said Fisher. "They continue to build phenomenal boxes, there's no doubt about it."
Santa Clara, Calif.-based Arista beat Wall Street estimates on Thursday by reporting revenues of $245 million for its fourth quarter, which ended Dec. 31, a 42 percent year-over-year increase.
Last week, Cisco reported a largely positive second fiscal quarter (which ended Jan. 23), posting 2 percent year-over-year growth to $11.83 billion. But the networking giant saw a drop in revenue for two key target areas of Arista: switching revenue, which fell 4 percent, to $3.48 billion, and its data center business, which declined 3 percent to $822 million.
Arista also said 2015 was a record year in sales, nabbing $838 million in revenue, a 43 percent spike compared to 2014.
"Arista is really going after it. They're pushing forward trying not to be preoccupied and focused on Cisco," said a top executive from a solution provider and longtime Arista partner, who declined to be named. "Clients aren't talking about lawsuits. They're loving what Arista is selling to them with Ethernet switches and their EOS (extensible operating system) … I don't see momentum slowing."
Steve Milunovich, a financial analyst for UBS, said in a report on Thursday that the lawsuit will continue to loom over Arista's stock for "a few more quarters," but UBS is projecting that Arista's revenue will top $1 billion in 2016.
"All four of Arista's major verticals grew in [the fourth quarter], but the cloud vertical saw particular strength, which is expected to continue," Milunovich said in his report. "We see cloud (capital expenditures) growing high teens in 2016 versus four percent in 2015, which helps Arista since it likely generates about 25 percent of revenue from that vertical."
Over time, Milunovich says Arista could see the total available market expand opportunities into the routing market based on advances in merchant silicon and Arista's expertise with spine switches.
San Jose, Calif.-based network leader Cisco slapped lawsuits against Arista in December 2014, saying the startup infringed on a number of its patents and had stolen Cisco-copyrighted material.
The International Trade Commission (ITC) this month ruled that Arista infringed on three out of five Cisco patents, with the judge clearing Arista on two out of four of its software features. The ITC is expected to issues findings on the other infringement cases sometime next month.
Cisco hopes the ITC will force Arista to stop shipping its networking switch products into the U.S. from overseas sites until the technology is removed and modified so they no longer infringe on Cisco patents.
CEO Jayshree Ullal, formerly senior vice president of Cisco's data center switching business, said she isn't concerned the lawsuits will impact customers as Arista has created workarounds.
"Our primary focus has been our customers and their support to us has been unwavering. Our goal has been to offer them appropriate design workarounds with non-intrusive upgrades," Ullal said during the company's earnings call Thursday. "They are very comfortable with our plans and very supportive with what we are doing and how we are working with them."
Arista partners said they've seen strong year-over-year growth in their Arista businesses and don't expect it to slow down in 2016. Solution providers believe if Arista does get hit financially by the lawsuits, it won't impede their business.
"At the corporate level for Arista, there may be some dollars changing hands, but we've seen it before with A10 [Networks] and Brocade [patent] lawsuits. We see this time and time again," said Fisher, of Myriad Supply. "I can't really think of many examples where it resulted in major change that affected end users."