Cisco Squeezed In Tough Q1 For Ethernet Switching: Study
That's according to Canalys, which on Wednesday reported overall Q1 revenue for the Ethernet switch market as down 8.8 percent compared to the year-ago quarter.
Canalys attributed the revenue decline to aggressive port-pricing competition and the weakened public sector demand in both North America and Europe. Despite a 2.5 percent annual increase in ports, Canalys said, total end-user revenue also decreased 12.3 percent from the fourth quarter of 2010.
Matthew Ball, Canalys director of enterprise services, warned that increasing pressure on the switch market could have a ripple effect for the channel.
"If current trends continue, vendors and channel partners will have to sell more volume than expected to reach revenue targets," Ball wrote in a research note. "This competition could trigger a wave of merger and acquisition activity among smaller switch vendors as they try to gain economies of scale."
Among vendors, Canalys highlighted the ferocious competition between Cisco, HP Networking and Juniper. According to the researcher, Cisco's overall Ethernet switch share dropped to 68.2 percent from the fourth quarter's 69.2 percentage, and from 73.1 percent a year ago. Cisco, which is in the midst of a broad restructuring as it attempts to counteract several disappointing quarters' worth of earnings, still derives nearly half its revenue from switching and routing. Switching revenues declined 9 percent in Cisco's third quarter, according to its most recent earnings report.
HP Networking, on the other hand, is gaining in the market, according to Canalys, which gave HP a 14.1 percent share of Ethernet switching. HP, which increased its stake in part from the 2010 acquisition of 3Com, has been aggressively touting itself as a lower-cost alternative to Cisco, especially in data networking.
Juniper, meanwhile, continues to gain on its EX switches, and according to Canalys, also gained share from the year-ago quarter, currently pegged at 2.4 percent, with growth more than 22 percent from a year ago.
The fourth- and fifth-place enterprise switch vendors (Layer 2/3/4 only, as Canalys evaluates them) are Brocade and D-Link, the latter of which gained 18 percent and claims a 1.6 percent share. Other vendors account for 11.5 percent of the market collectively.
Cisco will continue to be challenged on all sides, Canalys noted.
"Cisco is facing intense pressure on both its core switch and overall enterprise networking business," Ball said. "It is up against aggressive competition from Juniper in routing, Riverbed [Technology] in WAN optimization, F5 Networks in application delivery controllers and Brocade in storage networking.
By region, North America saw the steepest declines in Ethernet switching, down 13.3 percent and largely attributable to declines in federal government spending. Europe, the Middle East and Africa (EMEA) decreased 6.7 percent year over year, and Asia Pacific (a 3.7 percent decline) and Latin America (a 1.4 percent decline) were also down. Canalys noted that the true effects of the March earthquake in Japan won't be known until Q2 numbers are finalized.
The "lone bright spot" in Q1 was the growth in 10Gb port shipments, according to Canalys. Those increased 69.9 percent year over year. 1Gb ports, by contrast, grew 12.4 percent, and 100Mb ports decline 5.7 percent. Data center networking will be an increasingly contentious battleground, Ball said, given the range of vendors that announced data center fabric strategies within the past year.