No. of Recommendations: 100
I am making an early return after one heck of a party last night and great work out today, now cuddled with hounds on the command chair in the living room. I lost your post post Kingran, but you asked is there anyone who may take marketshare from Arista in 100gb and 400 gb switches.

The answer is sure, Cisco is trying and has been trying for years, Juniper is trying and has been trying for years. They will continue to try. Huaweii (I probably spelled that wrong) of course is trying as well. HPE is not, because HPE sells Arista products to the enterprise. There is not any new and upcoming start up that I am aware of.

Cisco still has more than 50% of total switch ports in the market. Arista’s marketshare over all is small, and depending on where you get the statistic is not above 14% total, or as low as 5.3% or so.

A former bear analyst from Morgan Stanley had to take it all back and now sees Arista moving up to 19% total marketshare in a year or two or so (I forget the exact time frame - but he had to take it all back and eat crow, and so he did).

That is the overall market. However, although Arista has made a ton of money with just that small marketshare with 10 gb and 40 gb, it is really 100 gb and 400 gb market that Arista becomes more dominant. I will get into that infra.

First, in regard to 100 gb, it is so popular because it has more bandwidth, a tm ugh less cost per gigabyte and only 1.2x as much power consumption. The economics of 100 gb is utterly compelling. The economics of 400 gb is tbd, but presently will be more expensive, so it will take longer to get the same sort of compelling economic benefits for 400 gb and thus 400 gb will start out next year in only special use cases.

100 gb, according to Arista will be growing for years and have a tail longer than 10 gb, that was a decade and still going.

In 2016, there were 1 million 100 gb ports in the market, in 2017 5 million, in 2018 it is expected that there will be 10-12 million ports. I do not have the estimates for 2019, but it should continue growing, even as 400 gb makes its niche appearance. As you can see, the total ports for 2018 it at least double of the ports for 2017.

What makes this so compelling for Arista is that Arista’s market share is much higher in 100 gb than it was in 10 or 40 gb. Much higher actually. I have seen estimates as high as 50%, but at the last earnings call was said to be 25%, which I believe was short-hand for 27.5% marketshare. I believe his is the market leader. Total marketshare tbd as I look for better sources. That is much higher from the other marketshare numbers I mentioned Supra.

The growth numbers are self-explanatory, even though one would expect the price per port to decline each year, it won’t decline by nearly as much as the increase in volume. And it is expected that Arista’s marketshare will continue to increase, thus how Arista is able to grow far faster than any of its competitors and far faster than the market.

Arista is the beneficiary of the equivalent of Moore’s law in the switch market. What use to be non-growth market for many years is suddenly tossing out, just like CPUs did, faster and faster speeds for better economics, that are pushing upgrades to the networks.

Cisco, Juniper, et al., have all been trying for years to keep up with Arista, and Cisco identified Arista as a mortal threat years ago. Despite this, Cisco has had little success in defending marketshare against Arista. Both Cisco and Juniper have done rather awful lately actually. To the point that Cisco will no longer break out its switch revenues separately and instead lumps it in with a much larger category (this was Cisco’s largest product, and to do this is amazing and very telling).

There are several advantages that Arista has had, but the primary one is their EOS operating system that was built from the ground up, is an open standard so it can be used with any third party hardware, and is backward compatible.

Cisco, Juniper, and anyone else, will not have years to create their own OS from scratch, and instead have to patch together their OSes to make it work like Arista’s does. This create problems with backward compatibility, this makes it more difficult to work with third parties, and this makes it more difficult to manage the network.

Cisco, as for example, runs its OS on individual switches, and is of course difficult to work with anything it other Cisco products. Cisco is making efforts to be more Arista like, but imagine the innovator’s dilemma they have in regard.

Cisco is said to be “resurgent” by Morgan Stanley (same analyst who had to do a mea culpa regarding his long term bearish stance on Arista) in that Cisco has multiple teams working on 400 gb and will not be “Arista’d” again. This despite the fact that Cisco has been unable to stop the loss of marketshare in 100 gb. Will things change in 400 gb? Hey, I do not know.

Thus why Arista has done so well, and is doing even better, with 100 gb really being an inflection point where Arista’s competitive advantage grows, and why I have had such confidence in it. Things can always change obviously, and I do not have any more information in regard at this time.

Hope this helps.

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