10G top-of-rack switches to surge to $1B in sales this year

Despite decline in overall market, Dell'Oro says data center Ethernet switches will defy trend

Even though sales of Layer 2/3 Ethernet switches declined 12% sequentially in the first quarter, sales of 10 Gigabit top-of-rack switches are expected to jump 51% to $1 billion this year, according to Dell'Oro Group.

Dell'Oro's previous estimates had the market segment reaching $800 million in 2011. In 2010, 10G top-of-rack switch revenue was $663 million, according to the firm.

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The total Layer 2/3 Ethernet switch market was $5.34 billion in the fourth quarter of 2010, according to Dell'Oro. A 12% decline brings it down to $4.7 billion in the first quarter of this year.

Dell'Oro attributes the sequential decline to seasonal softness and Cisco's fiscal second quarter being more heavily weighted toward the first two months of the quarter than normal. Cisco dominates the Ethernet switch market with a 70% revenue share, but the company is undergoing a troublesome product transition in that market as customers upgrade their legacy Catalyst switches to newer Nexus systems with better price/performance.

For the full year, Dell'Oro expects the Layer 2/3 Ethernet switch market to decline after record levels were achieved in 2010. The market last year was $19.8 billion and is forecast to drop 1.2%, to $19.5 billion, in 2011.

While most segments of the market are expected to decline, 10 Gigabit top-of-rack switches for data centers will be the strongest-performing sector, as servers are still in the initial stages of migrating from multiple Gigabit Ethernet connections to two 10G links, the firm states. Dell'Oro also notes that data center deployments, including 10G in top-of-rack, blade switches and modular switches, will have the strongest growth in 2011.

The top three top-of-rack vendors in terms of revenue are Cisco, Arista and IBM, according to Dell'Oro. For blade switches, the top three vendors are HP, IBM and Cisco; for modular switches, Cisco, HP and Brocade are the leading vendors.

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