Cisco saw its market share drop, even though interest in video conferencing is still high, IDC analysts said. Polycom grew both its revenue and share in Q2.
Video conferencing continues to draw interest from enterprises, but the uncertain global economy and reduced IT spending in the public sector are conspiring to drive down revenue in the market, according to analysts with market research firm IDC.
The analysts reported Aug. 24 that revenue in the video conferencing space fell 10 percent in the second quarter from the same period in 2011, and 6.9 percent from the first quarter this year. The $564 million in revenue was the lowest the IDC analysts had seen since the first quarter of 2011 and more than 27 percent lower than the market record in the fourth quarter last year.
Cisco Systems, the longtime leader in the market, was particularly hard hit, with its revenue in the second quarter falling 23.7 percent from the second quarter last year. Cisco is still the market leader, but saw its lead drop to 41.9 percent in the second quarter. The networking giant held 48.7 percent of the market in the first quarter, and 49.3 percent in the second quarter last year.
Cisco also is the top player in the immersive telepresence space, which is continuing to take a hit, according to IDC. Revenue in the multi-codec telepresence market segment fell 38.4 percent from the same three months last year.
There are several factors at play here, according to Rich Costello, senior analyst for enterprise communications infrastructure at IDC.
"Several of the video vendors pointed to the currently difficult macroeconomic situation, as well as a cutback in spending in key areas such as the public sector, including government and education, as reasons for the weak quarterly results," Costello said in a statement. "Although these factors are expected to persist and influence results somewhat in the second half of 2012, interest in video continues to grow among organizations, especially those with good use-case requirements."
Some vendors had a good quarter, according to IDC. For example, Polycom saw revenue increase 8.9 percent from the first quarter, though it was down 4.3 percent from the second quarter in 2011. Polycom also increased its market share, bringing it to 32.5 percent. That's up from the 27.7 percent in the first quarter and 30.5 percent in the second quarter of last year.
The video conferencing market continues to undergo significant changes as trends like mobility, cloud computing and bring-your-own-device (BYOD) drive a shift toward software-based solutions and greater integration of video into unified communications (UC) offerings.
"Despite the overall weak 2Q12 performance in the worldwide enterprise video conferencing market, we still see adoption being driven by video integrations with vendors' UC and collaboration portfolios, and with the increasing use of video among small workgroup, desktop and mobile users," Petr Jirovsky, senior research analyst for IDC's Worldwide Networking Trackers unit, said in a statement. "Video as a key component of collaboration continues to place high on the list of priorities for many organizations."
Major players like Cisco, Polycom and Logitech's LifeSize Communications business are shifting more of their focus to software, where they can extend the reach of their offerings to mobile devices like smartphones and tablets, and also can bring out solutions for smaller workgroups to complement their more expensive and complex room-based systems. That trend toward software is also giving rise to smaller vendors like Vidyo.
UC vendors also are looking to bring video into the mix. Most recently, Mitel announced a partnership with Vidyo and virtualization software vendor VMware to create a solution where users running Mitel's UC solution in a virtualized environment can now launch Vidyo-based video conferences. In addition, Avaya bought video collaboration specialist Radvision, while Juniper Networks in May invested in Vidyo.