Driven by 10G, Ethernet switches buck economic headwinds

Data center upgrades, 10G servers offset European crisis, public sector stinginess

The Ethernet switch market eked out modest growth in 2012 against the backdrop of an uncertain global economy, underscored by weakness in Europe and lower public sector spending.

Global Ethernet switch revenue rose 4.7% in 2012, and 5% in Q4 on a sequential basis, according to Infonetics Research. The top five vendors -- Cisco, HP, Juniper, Dell and Brocade -- all increased revenue in 2012 but smaller rivals managed to gain some share, the firm found.

Cisco and HP made up 75% of the $19.8 billion market in 2012. Revenue in Q4 totaled $5.1 billion, according to Infonetics.

[ THE DRIVER: Intel's 10G 'Romley' server to spur Ethernet switch growth ]

Ten gigabit Ethernet accounted for almost all switch revenue growth. Port shipments of 10G grew 66%, driven by data center upgrades, 10G server adoption, server virtualization and core network build-outs.

Also growing rapidly is 40G Ethernet. Port volumes were up 10X in 2012, Infonetics found, though from a small base.

The research firm expects healthier growth this year as discounting returns to normal levels and buyers seek higher-value products, like Layer 3 switches and higher-speed ports.

The same might be true for enterprise routers. Infonetics expects cloud adoption to drive 2013 spending back to more expensive mid-range branch routers after a preference for low-end devices at remote sites drove revenue down in 2012.

The worldwide enterprise router market totaled $3.5 billion in 2012, down 3% from 2011. Unit shipments, however, grew 5%.

Low-end routers, up 20%, drove all of the revenue growth in 2012 and represent the largest segment in unit shipments. Mid-range router sales jumped 8% in Q4 from Q3, 2012.

Average selling prices fell less than 1% in 2012, and in some cases grew, Infonetics found.

The firm expects the market to reach $5 billion by 2017, a compounded annual growth rate of 7.4%.

Market share changes were minor in 2012: No. 1 Cisco gained 0.2% share to 71.5%, and the top revenue share gainers were Huawei, Yamaha, and NEC, Infonetics found.

Jim Duffy has been covering technology for over 25 years, 21 at Network World. He also writes The Cisco Connection blog and can be reached on Twitter @Jim_Duffy.

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