Cisco, other router rivals challenged by economy, competition

Q3 shows a dip in revenues as Europe, "fiscal cliff" weigh

The worldwide carrier routing and switching markets dropped a bit in the third quarter, decreasing 2.5% from last year and 1.7% from Q2, to $2.75 billion. Global economic uncertainty - underscored by the U.S. "fiscal cliff" and continuing softness in Europe -- a challenging market and aggressive competition will continue to put pressure on the market, according to ACG Research.

Core routing revenues declined almost 10% from last year, and 2% from last quarter, ACG found.  Edge routing and switching revenues were down 1.7% from Q2 and just about flat with last year - a dip of 0.4%.

Cisco posted drops of 0.3% from Q2 and 0.8% from last year for the total market. Alcatel-Lucent decreased 2.16% from Q2 but was up solidly from last year's Q3 -- 8.2%. ACG reports that Alcatel-Lucent is seeing traction for its 100G ports in core, edge and metro applications.

Juniper increased worldwide routing revenue 1.2% from Q2, but was down 7.7% from last year. According to ACG, Juniper said a reduction in high-end networking purchases from services providers, difficulty penetrating new markets with new products, and strong competition from Cisco were factors in its Q3 results.

Indeed, competitive factors such as lower pricing and reduced margins are putting pressure on the routing segment, according to ACG. Others include large customers cutting spending and delaying purchases of new equipment, and the macroeconomic challenges playing into those decisions: continuing economic turmoil in Europe; and the fiscal cliff of automatic tax hikes and spending cuts potentially taking $600 billion out of the U.S. economy in early 2013 and possibly sparking another recession.

These are some of the reasons many buyers are evaluating SDNs. In a recent ACG survey, the firm found that 78% of respondents are either planning SDN deployments or discussing them, and that interest in the technology has heightened due to the macroeconomic environment and a desire to realize significant operational savings while increasing new service delivery.

Infonetics Research also found similar interest in SDNs in a recent survey.

Meanwhile, ACG also found in its Q3 carrier routing and switching report that core network traffic is growing in excess of 50% per year, and new services such as content-rich digital media, cloud and mobile are placing new requirements on the network. Interest in mobility and cloud computing continues to grow with service providers who view the technologies delivering operational savings as they look to offer new products and services.

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