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    Report: VOIP, Security Features Shore Up Router Revenue

    By
    Ellen Muraskin
    -
    September 2, 2004
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      After suffering a 10 percent drop in revenue over the past quarter, the global enterprise router market is pinning its hopes on added VOIP and security features to shore up selling prices per unit, according to a report from Boston-based Infonetics Research Inc.

      Report author Jeff Wilson, who pointed to Cisco Systems Inc. and Vanguard Managed Solutions LLC as router vendors that are incorporating voice gatewaying into their products, predicted that more vendors would follow suit.

      Infonetics predicts that VOIP ports will enjoy a compound annual growth rate (CAGR) of 15 percent over the next five years in the high-end enterprise router category, defined as modular platforms switching OC-3 (optical carrier level 3, equal to 155.52Mbps) to OC-12 (three OC-3) speeds. In the midrange category—handling bandwidth between T-3 and OC-3 speeds—it sees a 22 percent, five-year CAGR. Overall router ports, in contrast, are expected to grow by only 10 percent over that period.

      “The overall revenue opportunity is pretty much stable. CAGR for the overall market is zero percent,” said Matthias Machowinski, VOIP specialist with Infonetics. “With decreasing selling prices for some of the data-only ports, vendors maintain the revenue level with VOIP and security features.”

      “3Com and Huawei, [a Hong Kong networking vendor that announced a joint venture with 3Com in March 2003 to develop and market enterprise networking gear] are very keen to revive their standing in this market,” Machowinski said.

      The lower pricing strategy of 3Com Corp. and Huawei Technologies Co. Ltd., he said, aims to make a dent in Ciscos 76 percent revenue share. Last month, Huawei announced that British Telecom had successfully finished testing the Hong Kong companys low- and midrange Quidway routers, which include support for VOIP.

      Counted by enterprise router units sold, Cisco has a fifth of the market, followed by Linksys and D-Link sharing second place, according to Infonetics study. (Infonetics counts Linksys separately, even though it was acquired by Cisco.) Netgear holds fourth place. Both Linksys and Netgear, in the SOHO and home networking market, recently announced plans to imbed VOIP technology in their wired and wireless routers.

      Although VOIP enterprise network diagrams commonly show third-party VOIP gateway platforms behind IP router boxes, networking vendors also imbed the voice packetization—and optionally, digitization—function as card options in their routers. “Its one less point of failure,” said Karen Ayotte, solutions manager of IP telephony at Vanguard Managed Solutions LLC in Mansfield, Mass.

      “Weve had voice over frame relay and voice over IP on our routers for a number of years,” Ayotte said. Vanguard routers, which also offer various security options, often are sold as part of the vendors managed solutions services offering, which remotely manages Vanguard as well as Cisco VOIP-enabled routers to assure quality of service, proper routing and LAN function.

      /zimages/1/28571.gifAnother Infonetics report predicts the near doubling of IP PBX sales over the next year. Click here to read more.

      Ayotte estimated that 40 percent to 50 percent of Vanguard routers in North America ship with voice, adding that the figure is closer to 70 percent outside North America and as much as 90 percent in Latin America.

      Vanguard has a special niche among retail and financial services firms, where their routers support legacy terminal emulation protocols from POS (point of sale) registers and ATMs and convert them for IP transport across the WAN. This presents retail chains with a chance to run a few phones worth of voice to each branch over the data link.

      /zimages/1/28571.gif Check out eWEEK.coms VOIP & Telephony Center at http://voip.eweek.com for the latest news, views and analysis on voice over IP and telephony.

      Ellen Muraskin
      Ellen Muraskin is editor of eWEEK.com's VOIP & Telephony Center. She has worked on the editorial staff at Computer Telephony, since renamed Communications Convergence, including three years as executive editor. Muraskin's work has also appeared in Popular Science magazine and other publications.

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