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Ethernet market continues to rebound as Cisco leads HP

Ethernet market continues to rebound as Cisco leads HP

“Overall revenue and port shipment growth was weaker than expected in 2Q15."

The worldwide Ethernet switch market (Layer 2/3) produced revenues of $US5.8 billion in the second quarter of 2015 (2Q15), an increase of 1.0 per cent year over year and an increase of 7.6 per cent quarter over quarter.

Meanwhile, the worldwide total enterprise and service provider router market continued to rebound from recent year-over-year declines, growing revenues 11.5 per cent year over year in 2Q15 and also growing 11.5 per cent sequentially.

These growth rates are according to preliminary results published in the International Data Corporation (IDC) Worldwide Quarterly Ethernet Switch Tracker and Worldwide Quarterly Router Tracker.

From a geographic perspective, Asia/Pacific including Japan (APJ) saw a small decline of -2.4 percent year over year despite a 12.3 per cent sequential increase.

“Overall revenue and port shipment growth was weaker than expected in 2Q15,” says Rohit Mehra, Vice President, Network Infrastructure, IDC.

“Even the relatively strong 10Gb segment saw weaker results than expected.

“Given the increasing workloads traversing networks across the enterprise, data centre, and with service providers, this weakness is likely the result of anticipation for and delayed decision-making around newer and emerging speeds, the intensifying competitive landscape, and of course, continued macroeconomic concerns.”

10Gb Ethernet switch (Layer 2/3) revenue decreased -3.9 per cent year over year, coming in at just under $US2.1 billion while 10Gb Ethernet switch port shipments grew a robust 16.4 per cent year over year with nearly 7.3 million ports shipped in 2Q15, as average selling prices continued to fall.

40Gb Ethernet revenue came in at over $US500 million for the third consecutive quarter in 2Q15, growing 59.7 per cent year over year.

10Gb and 40Gb Ethernet are expected to continue to be the primary drivers of the overall Ethernet switch market in the near-term. 1Gb Ethernet switch revenue declined slightly (-1.5 per cent year-over-year) as this segment continues to face price erosion.

The worldwide enterprise and service provider router market increased 11.5 per cent year over year in 2Q15. Contrary to the previous quarter, both the enterprise and service provider segments saw strong growth.

The enterprise segment increased 8.3 percent year over year and 7.7 per cent quarter over quarter in 2Q15.

The service provider segment performed especially well, growing 12.5 per cent year over year and 12.7 percent quarter over quarter.

This will be a market to watch closely over the coming quarters as software-defined architectures start to take hold across the WAN, enabling network managers and service providers alike to benefit from these emerging capabilities.

The combined enterprise and service provider router market also saw strong performances across the regions - APJ also saw a positive quarter, growing 8.9 per cent on an annual basis in 2Q15.

Vendors

Cisco finished the quarter with 1.9 per cent year-over-year growth in the Ethernet switching market and market share of 59.9 per cent, up slightly from its 59.4 per cent share in 2Q14.

In the hotly contested 10GbE segment, Cisco held 57.5 per cent of the market in 2Q15, down from 61.1 percent in the previous quarter, and from the 60.9 per cent it held in 2Q14.

Cisco's service provider and enterprise router revenue increased 14.9 per cent year-over-year.

HP's Ethernet switch revenue decreased -2.6 percent year over year, but grew 22.9 per cent quarter over quarter in 2Q15. HP's market share in switching rose to 9.5 percent from 8.3 per cent in the first quarter of 2015, but was down from the 9.9 per cent share it held in 2Q14.

Juniper rebounded from a down first quarter in Ethernet switching with a year-over-year increase of 6.9 percent and sequential growth of 15.5 percent in 2Q15.

Its router revenue declined year-over-year for the fourth consecutive quarter, falling by -4.5 per cent on a year-over-year basis, despite increasing 18.8 percent sequentially.

“Falling switch port prices have a flattening effect on overall market growth, even as demand for switches, especially 10Gb and 40Gb Ethernet switch ports, increases,” adds Petr Jirovsky, Research Manager, IDC's Networking Trackers Group.

“As newer standards at higher speeds such as 25Gb, 50Gb, and 100Gb Ethernet grow to critical mass over the next few years, one can expect this segment to stay dynamic and interesting for the foreseeable future.”

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