The Ethernet switch space saw revenue declines despite a rise in the number of ports, thanks in large part to the intensifying competition between Cisco, HP and Juniper, analysts from Dell'Oro and Canalys said.
Cisco Systems
is facing increasing pressure from Hewlett-Packard and Juniper Networks in an
Ethernet switching market that saw revenue decline in the first quarter, due to
pricing competition, cutbacks in public spending and seasonal softness,
according to market research firms Canalys and Dell'Oro Group.
In separate
reports issued June 1, analysts with the both firms said they expect pressures
on revenue to continue in the second quarter and throughout 2011, though they
noted that the growing 10 Gigabit Ethernet market will remain strong as data
center administrators continue the move from 1GbE environments.
"With most
segments expected to decline in 2011, 10 Gigabit Ethernet top-of-rack switches
will be the strongest-performing sector as servers are still in the initial
stages of migrating from multiple Gigabit Ethernet connections to two 10
Gigabit Ethernet connections," Alan Weckel, director of Ethernet switch market
research at Dell'Oro, said in a statement.
Canalys said
the 10GbE space saw 69.9 percent revenue increases over the first quarter in
2010. Meanwhile, revenue of 1GbE ports grew 12.4 percent.
"We expect the
battle for data center networks to intensify, as leading vendors aim their
fabric strategies at creating simplified architectures," Matthew Ball, director
of enterprise services at Canalys, said in a statement. "The battle for campus
and branch-office environments, however, should not be ignored."
Overall,
Dell'Oro said Ethernet switch revenue fell 12 percent over the fourth quarter
of 2010. Canalys said revenue was down 8.8 percent over the first quarter of
2010.
According to
Canalys, Cisco continued to lead the market, with a 68.2 percent share. That
was followed by HP with 14.1 percent, Juniper with 2.4 percent and Brocade with
2.2 percent. However, Cisco saw its market share drop from 73.1 percent in the
first quarter of 2010, while both HP-after its $2.7 billion acquisition of 3Com last year-and Juniper gained
share.
"Cisco is
facing intense pressure on both its core switch and overall enterprise
networking businesses," Ball said. "It is up against aggressive competition
from Juniper Networks in routing, Riverbed Technologies in WAN optimization, F5
Networks in application-delivery controllers and Brocade in storage
networking."
That intense
pressure played a role in the revenue decline in the overall market, due to
pricing competition between Cisco, HP and Juniper, he said, noting that while
port sales increased 2.5 percent, total end-user revenue dropped 12.3 percent
over the last quarter, to $4.6 billion.
"If current
trends continue, vendors and channel partners will have to sell more volume
than expected to reach revenue targets," Ball said. "This competition could
trigger a wave of merger and acquisition activity among smaller switch vendors
as they try to gain economies of scale."
Cisco
executives over the past several quarters have struggled with disappointing
financial numbers, in particular seeing weakness in its core switching and public sector
businesses.
Dell'Oro said
the strongest growth in 2011 would be in data center deployments, such as
businesses using 10GbE top-of-rack, blade switches and modular switches. In the
top-of-rack space, the top vendors by revenue were Cisco, Arista and IBM. For
blade switches, it was HP, IBM and Cisco, and for modular switches, it was
Cisco, HP and Brocade.
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