Data Center Networking Stocks Rose 16.3% in the Third Quarter

By David Gross

Data Center Networking Stocks Posted a 16.3% gain in the 3rd quarter, ahead of the 12.3% gain posted by NASDAQ and 10.7% for the S&P 500.    The reason data center networkers beat the broader markets was the layer 4-7 suppliers.   Radware gained 68% for the quarter, followed closely by Riverbed at 65%, then Citrix at 62% and F5 at 51%.   The only other stock within range of application networkers was EZChip, whose chips are used for layer 4-7 networking, which was up 44%.  

The exceptional performance of the layer 4-7 networkers has pushed up valuations, with Citrix now hovering near an all-time high at $13 billion, and F5 sailing past networking industry stalwart Alcatel-Lucent with an $8.4 billion market cap.   That said, quarterly year-over-year revenue growth has also been strong, with F5 growing its top-line 36% over the last 12 months, Radware adding 30% to its sales, and Riverbed expanding 39%.

The 16.3% gain for networkers is based on our DataCenterStocks.com Networking Index, which is comprised of 25 chip, cable, and network equipment companies with some degree of dependence on data center customers.   Unlike our Services Index, which is market-weighted, the Networking Index is price-weighted to prevent a few large caps, especially Cisco, from overwhelming it.   Both indices are set to values of 100 as of the market open on October 1, 2010.   The Networking Index would have been 85.98 on July 1, 2010.  

		DataCenterStocks.com
		Networking Index
Company	Ticker	Sep 30 Close	July 1 Open	Quarterly Gain
Radware	RDWR	34.36	20.47	67.86%
Riverbed	RVBD	45.58	27.62	65.03%
Citrix	CTXS	68.24	42.23	61.59%
F5 Networks	FFIV	103.81	68.57	51.39%
EZChip	EZCH	25.25	17.50	44.29%
Voltaire	VOLT	6.16	4.40	40.00%
Juniper	JNPR	30.35	22.82	33.00%
Finisar	FNSR	18.79	14.90	26.11%
Belden	BDC	26.38	21.95	20.18%
Blue Coat	BCSI	24.06	20.43	17.77%
Extreme Networks	EXTR	3.11	2.70	15.19%
Emulex	ELX	10.44	9.18	13.73%
Brocade	BRCD	5.86	5.16	13.57%
Corning	GLW	18.28	16.10	13.54%
Marvell	MRVL	17.51	15.76	11.10%
Cavium	CAVM	28.76	26.19	9.81%
Broadcom	BRCM	35.39	32.89	7.60%
Avago	AVGO	22.51	21.06	6.89%
Qlogic	QLGC	17.64	16.62	6.14%
Cisco	CSCO	21.90	21.31	2.77%
NetLogic	NETL	27.58	27.20	1.40%
LSI	LSI	4.55	4.60	-1.09%
AMCC	AMCC	10.00	10.48	-4.58%
Mellanox	MLNX	19.64	21.90	-10.32%
PLX Technologies	PLXT	3.62	4.19	-13.60%
Total				16.30%