Cisco Partly To Blame For Palo Alto Networks' Pain?

The advance of Cisco Systems (CSCO) in the security market could be one of the causes of the problems in Palo Alto Networks (PANW), whose shares fell in the premarket action Wednesday after the company reported tax revenues second quarter.

Palo Alto shares fell more than 20 percent to 121.30 in the premarket market on today's stock market, echoing a sharp slump on Nov. 22 that came after the company's revenue and revenue . Although Palo Alto's management attributed the ruling to sales execution issues and a pause in spending prior to the launch of the new product, analysts say Cisco's increased competition could also be a factor.

In its second quarter ended February 15, Cisco said that security revenue increased 14% to $ 528 million. Palo Alto said Tuesday that second-quarter fiscal revenue rose 26 percent to $ 422.6 million, with consensus estimates of $ 429.6 million missing.
"Management cited implementation issues as opposed to competitive challenges," Baird analyst Jayson Noland said in a report to clients. "However, Cisco has significantly improved its security portfolio (and) we have heard of growing competition with Cisco."

Baird, JP Morgan, William Blair and Wunderlich lowered Palo Alto shares Wednesday, while Piper Jaffray, RBC Capital, BMO Capital Markets and Citigroup lowered their price targets for the company.