Consumers embracing broadband and companies turning to more advanced data services helped sales of some larger routers turn around in the second quarter, according to figures released by two market analysis companies this week.
A Gartner analyst said Thursday that worldwide revenue from sales of all service-provider routers bounced back with a revenue gain of 6 percent in the quarter, while figures released by Dell'Oro Group showed a 10 percent rise in sales of the biggest routers, those typically used by service providers to transmit data at 10G bps (bits per second).
Router sales to telecommunications carriers and Internet service providers overall had been slumping over the previous year, according to Gartner analyst Jennifer Liscom. As more home and corporate customers have signed up for IP (Internet Protocol) services that require high bandwidth, service providers have had to beef up their networks to carry that bandwidth, she said.
"The name of the game a year ago was to capture as many subscribers as you could. Now they've realized that was a mistake. They were deploying equipment in a lot of areas where the equipment wasn't being fully utilized ... now there's more strategic planning," Liscom said.
The worldwide service provider router market totaled $455 million in revenue in the second quarter. That was down from almost $494 million in last year's second quarter but a step out of the trough of the previous three quarters. Revenue sank to $445 million in the third quarter of last year, stayed there in the fourth quarter and dropped to just $428 million in the first quarter of this year, Liscom said.
North America and Europe both showed gains, while revenue in the Asia-Pacific region also was strong, she said.
Demand is growing because more consumers are signing up for DSL (digital subscriber line) and cable modem services and those who have it are using more bandwidth, according to Liscom. For example, more Web sites are using streaming video and more users are seeking it out, she said.
In addition, MPLS (Multiprotocol Label Switching) now allows service providers more easily to guarantee business customers security and dedicated bandwidth on their networks, she said. Corporations are embracing these new services, which also boosts router demand, she added.
Dell'Oro released a study that showed the high-end router market grew between the first and second quarters though router sales as a whole remained flat for the fifth consecutive quarter. Worldwide revenue for the fastest routers was $170 million, while router revenue as a whole came in at $1.5 billion for the quarter, according to a Dell'Oro statement.
Strong sales of Juniper Networks' recently introduced T640 and T320 models helped drive up high-end revenue, said Dell'Oro analyst Shin Umeda. It's hard to say whether that kind of performance will be repeated in the coming quarters, and revenue is still far below its level in 2001, he added. However, Umeda believes the previous generation of routers installed in the late 1990s may be replaced by more advanced models.
"I think we're in the early stages now of the next generation of core network evolution," Umeda said.
Both analysts said Cisco Systems continues to dominate these markets but Juniper had a strong quarter. Cisco had 54.6 percent of the service-provider router market in the quarter, measured in revenue, while second-place Juniper had 29.9 percent, according to Gartner. Dell'Oro reported that Cisco saw a 2 percent rise in revenue for high-end routers while Juniper turned in a 23 percent gain.