IP Phone Growth in Huge Spike

New market research pegs IP telephony growth at 30 percent.

The sale of IP phones went through the roof over the last year, and especially in the second quarter, with shipments growing 53 percent over the last year and 23.8 percent from the first to the second quarter, according to report just released by Synergy Research Group.

The research report, which looked at the worldwide market for enterprise IP telephony equipment, pegged growth for the entire market at 30.4 percent year-to-year and 13.7 percent from the first to the second quarter of 2006.

Worldwide revenue for enterprise IP telephony, which includes LAN telephony, pure IP telephony, the converged market and IP phones, approached $1.2 billion.

"This quarter was a huge spike just in itself," said SRG co-analyst Ryan Olsen in Reno, Nev.

"Last year we had a pretty good spike later in the year, but this absolutely just jumped out. Its an extremely great quarter for IP phones both sequentially and year over year."

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SRG believes that growth in gross domestic product in the United States contributed to the spike to some extent.

Olsen speculated that enterprise users are beginning to believe it when vendors say that IP telephony provides a competitive advantage to enterprises that embrace it.

"To a certain extent its possible that enterprises are starting to realize this as well. Well see if this is a trend [in coming quarters]," he said.

Despite the GDP growth in the United States, the Asia-Pacific region grew faster than the United States as well as EMEA (Europe, the Middle East and Africa).

Enterprise IP telephony sales in APAC grew 39 percent in the quarter, while the United States grew at 31 percent and EMEA at 25 percent.

Benefiting from the rapid growth in particular were four big heavyweight vendors: Cisco, Avaya, Nortel and Alcatel.

Cisco for the first time since 2003 barely edged past Avaya to garner the largest share of the enterprise IP telephony market with 25.3 percent of the market, compared to Avayas 25.2 percent market share.

"Cisco has slowly been nipping at [Avayas] heels and building their success over the last couple of years," said Olsen. Nortels market share is 13 percent.

Cisco with its No. 1 market share position grew the fastest from the first to the second quarter this year at 29 percent.

Nortel, at No. 3, grew by 20.6 percent from quarter to quarter, and No. 2 Avaya grew 14.7 percent. Alcatel grew by 9.3 percent from the first to the second quarter.

Nortel, which has struggled in recent years with a management shakeup, financial results restatements and reorganization, surprised SRG with its solid growth.

"It will be interesting to see if this is just a one quarter pop or if theyre turning things around," said Olsen.

Total worldwide IP phone shipments for the second quarter just topped 2.2 million.

"The big news there was that Cisco shipped over 1 million IP phones for the quarter," said Olsen.

Rival Avaya, meanwhile, shipped just over 1 million converged lines.

For the third quarter, SRG is forecasting worldwide revenue of $1.3 billion for enterprise IP telephony, and $5 billion for all of 2006.

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