Cisco Stock Rises on Report Amazon Not Planning to Sell Switches
Cisco Systems Inc. (CSCO) shares were up 1.97% in pre-market trading after Amazon.com Inc. (AMZN) denied reports that it plans to start selling its own network switches to other businesses.
The networking hardware firm told MarketWatch on Wednesday that Amazon Web Services (AWS), Amazon’s on-demand cloud computing subsidiary, had agreed not to muscle in on its turf, out of respect for the longstanding relationship that exists between the two companies.
“Cisco and AWS have a longstanding customer and partner relationship, and during a recent call between Cisco CEO Chuck Robbins and AWS CEO Andy Jassy, Andy confirmed that AWS is not actively building a commercial network switch,” a Cisco spokesman said.
According to MarketWatch, a spokeswoman for AWS confirmed that statement, but refrained from providing more details. The AWS spokeswoman reportedly refused to comment on speculation that Amazon is creating its own network switch, but did add that the company has no plans to sell this type of equipment to other businesses.
News that Amazon, a renowned disruptor of many different industries, isn’t about to wage war on Cisco was well-received by investors. Shares in the San Jose, California-based company, the market leader of network switches climbed on Wednesday evening.
Shares in other white-box manufacturers Arista Networks Inc. (ANET) and Juniper Networks Inc. (JNPR) rose 1.57% and 0.85%, respectively, ahead of Thursday’s open. (See also: How Amazon Could Crush These 4 Tech Stocks.)
On Friday, Cisco and shares of other networking vendors fell after The Information reported that Amazon planned to sell its own network switches with built-in connections to its AWS cloud-computing offerings. According to The Information, Amazon’s networking equipment is based on open-source software and sourced from white-box manufacturers, making it potentially cheaper than offerings from other competing companies.
Cisco was identified as the biggest potential loser of Amazon’s rumored entry into the market. The San Jose, California-based company has struggled to grow revenue from switches, amid heightened competition from budget and high-quality network providers, but still remains the market leader in the space. That status caused its share price to fall about 3% following the release of The Information’s report. (See also: Cisco’s Stock May Plunge by 10%.)
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