Enterprise routers up, switches down in 1Q06

Infonetics: After a down year in 2005, enterprise router manufacturer revenue is back on track for slow but steady growth, totaling $1 billion worldwide in 1Q06 and forecast to grow to $4.8 billion in 2009 despite intense price pressure.

Meanwhile, after blowing past the $15 billion mark in 2005 and gaining 3% in the fourth quarter, the worldwide layer 2–3 Ethernet switch market cooled markedly in the first quarter, with revenue dropping 12% and ports dropping 3%.

The layer 4–7 switch market dipped as well (8%), after a very strong 4Q05 (up 19%), to $198 million in 1Q06, and is forecast to grow at an average annual pace of 5% through 2009, and unit shipment growth will be similar, totaling 57,500 units in 2009.

The enterprise network infrastructure markets took a breather in the first quarter, but that’s due to seasonal buying patterns, not a slowdown . Year-over-year, sales are markedly higher as organizations continue to upgrade their aging infrastructure. Overall, we expect to see healthy growth over the next few years for enterprise networking gear. The massive Ethernet switch market will post big gains in port shipments in 2006, but because of slashed 1G and 10G port prices, revenue will remain flat until pricing stabilizes sometime in 2007, after which we’ll see a return to revenue growth.

• worldwide manufacturer revenue for layer 2–7 switches dropped 12% in 1Q06, but is forecast to grow 20% between 2005 and 2009, when it will top $19 billion

• Over 73 million layer 2–3 Ethernet switch ports were shipped worldwide in 1Q06, 3% less than 4Q05, but 23% more than 1Q05

• Fixed switches have grown steadily over the past 2 years, accounting for 54% of total layer 2–3 Ethernet switch revenue in 1Q06; chassis switches account for the balance

• Cisco maintains its strong lead in worldwide layer 2–3 Ethernet switch revenue and port share; NETGEAR is second for ports, ProCurve is second for revenue; D-Link is third for ports, Nortel is third for revenue

Router Highlights

• Cisco leads the enterprise router market by a wide margin, followed by Huawei and Juniper

• worldwide enterprise router units will pass the 3 million mark in 2009

• 48% of 1Q06 enterprise router revenue was from high-end routers, 45% from mid-range, and 7% from low-end

• 40% of 1Q06 enterprise router revenue was from North America, 36% from EMEA, 17% from Asia Pacific, and 7% from CALA

L2–L7 LAN Switches Enterprise Routers

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