Cisco Systems (CSCO) emerged as the top choice for networking in Morgan Stanley's third-quarter CIO survey, despite a broader trend of moderating IT spending. The survey, analyzed by Morgan Stanley analyst Meta Marshall, revealed that net vendor spend intentions dropped to +28% from +57%, while data center purchase intentions eased to +37% from +55%. However, both figures remained ahead of industry peers. Campus networking trends showed resilience, with upgrade intentions improving to +36% from +33% and switching spending strengthening, even as Cisco's retention rate softened to 63% from 68%.
Security spending remained the strongest category, though intentions eased to +70% from +85%. Cisco's security product purchase intentions declined to 47% from 57%. The survey also noted improved sentiment for Splunk, with 31% of noncustomers reporting a better view of Cisco's offering, up from 24%. Morgan Stanley maintained its Overeight rating and $135 price target on Cisco following the survey results.
The report highlighted that equipment pricing increases contributed to spending moderation, with project delays rising to 13% from 2% quarter over quarter. Marshall noted that 83% of respondents reported 1-10% price increases, and 40% indicated further increases would delay purchases.