Recession Hits Ethernet Switch Market

 
 
By Jeffrey Burt  |  Posted 2009-02-26
 
 
 

The Ethernet switch market, which had been holding up well during the economic downturn over the past couple of years, saw its numbers drop in the fourth quarter as the recession really hit, according to a report from Infonetics Research.

According to the report, released Feb. 24, global revenue from Ethernet switches started strong in 2008, but slowed as the year wound down. Revenue was down 7 percent from the third quarter to the fourth quarter in 2008, and down 2 percent from the fourth quarter in 2007.

For the year, revenue in 2008 grew 5 percent over 2007, to $18.2 billion.

"The deterioration in worldwide economic activity is finally catching up with the Ethernet switch market," Matthias Machowinski, an analyst at Infonetics, said in a prepared statement. "After besting our forecast one last time in the third quarter, the market is down sequentially in the fourth, and also down year-over-year for the first time in several quarters."

Machowinski said that while the short-term outlook is poor, with companies cutting back on their purchases, there were some positive points in the fourth quarter.

The North American market was up both sequentially and year-over-year, which he said was surprising given that it was this region that is shouldering the bulk of the blame for the global recession. Revenue in North America for 2008 was up 2.6 percent over the previous year, and 1.4 percent quarter-over-quarter in the fourth quarter.

In addition, Ethernet switch manufacturers were able to "shift the sales mix to higher-priced products," Machowinski said. "If this trend sustains, it should help with profit margins in what is expected to be a tough year ahead."

Global revenue for 10G fixed Ethernet switches doubled in 2008, and the number of 1G fixed POE (power over Ethernet) ports sold jumped 56.4 percent during the year.

Some of the winners for the quarter were Adtran, Alcatel-Lucent, Nortel Networks and Extreme Networks, according to Infonetics. Cisco Systems accounted for the bulk of the year-over-year drop in the overall Ethernet switch market for 2008, though the vendor saw revenues increase 5 percent in the fourth quarter.

Revenue in the application switch market fell 4 percent, to $272 million, in the fourth quarter, and Infonetics expects the trend to continue, given that much of the market is tied to the financial services industry.

The only two exceptions to the down quarter in the application switch market were Citrix Systems and Radware, according to Infonetics.

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