The near and distant horizons

Worldwide router sales in the second quarter declined 6 percent sequentially to US$1.5 billion, according to the latest figures from Dell'Oro Group Inc. Declines in higher end routers - those greater than or equal to 1G bit/sec - offset gains in the lower end.

The low-end router segment - those less than or equal to 900M bit/sec and supporting WAN connection speeds up to T-1/E-1 - was the only segment with increasing sales in total and for all vendors, according to Dell'Oro. At the very high end, unit shipments were level; however sales declined as a result of users shifting away from the expensive high-speed ports - OC-192/STM-64 and OC-48/STM-16 - to the low-speed ports: OC-3/STM-1 and Ethernet.

The leader continues to be Cisco Systems Inc., which saw its revenue decline 6 percent from the first quarter to $1.32 billion. But Cisco appears to have gained more than 2 percent share from the 85.5 percent it had in the first quarter.

No. 2 Juniper Networks Inc.'s sales dipped 10 percent to $94 million. The company's share remained about flat, dipping only .1 percent.

No. 3 Unisphere Networks Inc., which was acquired by Juniper in May, saw its sales dive 22 percent sequentially, according to Dell'Oro.

In edge/aggregation routers specifically, worldwide sales totaled $471.6 million in the second quarter, which is about flat with the first quarter, according to Dell'Oro competitor Infonetics Research.

Cisco's revenue grew 14 percent. The company achieved 67 percent market share in the second quarter, its highest level since 2000, Infonetics found.

Juniper and Unisphere's combined the second quarter market share is 14 percent, according to Infonetics. For all of 2002, Infonetics expects the edge/aggregation market to total $1.9 billion, a 25 percent increase from 2001.

A major trend emerging in edge/aggregation is the imminent overlap of this class of routers with IP services routers, Infonetics says.

Vendors are adding firewalls, IPSec blades, MPLS-based service capabilities and more quality-of-service functionality to make their edge/aggregation routers service-rich. This will pit the aggregation devices directly against IP services routers, which until now owned the firewall, VPN tunneling and MPLS/QoS domain, Infonetics says.

As these products develop into the same breed, competition will get fierce, and not all products - or companies - will survive the battle, Infonetics says.

In other equipment markets, shipment of voice and ATM OC-3 WAN switch ports for packetized voice applications rose 4 percent in the second quarter from the first quarter, despite a 6 percent drop in multiservice WAN switch revenue, to $639 million, Dell'Oro reports. Nortel was the leader in the 45,100 voice and ATM OC-3 WAN switch port shipments in the second quarter, followed by Lucent and Alcatel, according to Dell'Oro.

Nortel port shipments grew 41 percent between the first quarter and the second quarter, while Lucent's and Alcatel's declined 5 percent and 12 percent, respectively, according to Dell'Oro.

Multiservice WAN switches are increasingly being deployed as gateways between circuit switched TDM networks and packet-based IP networks.

The overall worldwide service provider equipment market, however, will shrink 23 percent this year from last, according to Probe Research. Recovery will slowly appear in 2004, the firm states.

Probe, however, does not anticipate a return to the spending levels witnessed in 2000 any time during the next few years. And there is likely to be some further attrition among vendors in the next 18 months as a follow on to the recent closures and Chapter 11 filings.

The companies that recover earliest from the slowdown will be those that have focused on IP and edge service delivery, Probe predicts. Those operating exclusively in the long haul and optical sectors will face a long and difficult road ahead of them, as carriers are likely to continue put the squeeze on these vendors by sweating their own assets for as long as possible, the firm expects.

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More about Alcatel-LucentCiscoInfonetics ResearchJuniper NetworksLucentProbe ResearchSECSTMUnisphere Networks

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