Cisco could reap the benefits of the Western world's security crackdown on Huawei enterprise networking equipment, analysts from JP Morgan have said.
"We expect companies with established global presence (again primarily Cisco and Ciena amongst others) to be well positioned to benefit from a pullback in business wins relative to 5G networks for Huawei," wrote analyst Samik Chatterjee, as quoted by US financial blog The Street.
As reported over the second half of 2018, the US Federal Communications Commission (FCC) has been proposing to exclude Huawei kit from Universal Service Fund broadband subsidy support, a move that has been vociferously opposed by the Chinese firm. Five Eyes partners Australia and New Zealand have both made moves to block the Chinese vendor from taking part in telco infrastructure projects – including Oz's national broadband network and 5G networks. In the UK, British telco BT recently uninstalled Huawei equipment from its core 5G network, airily insisting that this was all part of an existing plan to keep the mobile firm far from its centre.
Countries in Europe have been generally slower to jump aboard the security bandwagon.
In December, the US asked Canadian authorities to arrest the daughter of Huawei founder Ren Zhengfei on charges claimed to be connected to allegations around breaking American trade sanctions on Iran. The ensuing diplomatic spat (and subsequent spate of Chinese arrests of Canadians in the country) caused by these security fears isn't going away any time soon.
What's in it for Cisco, then? According to JP Morgan, the EMEA and APAC (less China, natch) markets are ripe for expansion back into the 5G networking equipment area. While this may not play particularly well with the general shift in the West away from physical infrastructure to more lucrative software-as-a-service models, with recurring billing patterns, money talks.
JP Morgan is bullish on Cisco, having added it to a "focus list" of companies that investors should pay attention to back in December 2018. Investor news site SeekingAlpha reported at the time that Cisco's share price was up 24 per cent year-on-year. ®