The struggling economy is going to make 2009 a tough year for most network equipment. The Ethernet switch market is about to undergo its sharpest decline since the dot-com bust, and the market for service provider routers is expected to see its first decline in seven years, according to recent reports from the Dell'Oro Group.
The firm forecasts the Ethernet switch market to drop almost 10% this year, which would be the most drastic decline since 2001. The researchers said that the economy has forced buyers to change their behavior: "over the short term, customers have shifted their purchasing patterns from a focus on getting more features and functionality for the same price or a small price premium, to one where they now focus on getting the same features and functionality at a lower cost."
Dell'Oro says 10/100Mbps switch revenue will drop, and Gigabit Ethernet will slow down as well.
One bright spot is 10 Gigabit Ethernet. Believe it or not, in the midst of all this gloom and doom, the most expensive Ethernet of them all is expected to grow, as products ramp up this year. The growth will be especially apparent in servers, where both network interface cards and LAN-on-motherboard are expected to take off.
Meanwhile, Dell'Oro also sees demand for service provider routers dropping for the first time in seven years, as telecoms cut back on their investments.
Interestingly, the firm notes that the drop shouldn't affect network performance. That is, service providers have built up enough capacity recently that a slowdown in capital expenditures shouldn't affect overall throughput.
Revenue from cable, DSL and PON access concentrators are forecasted to drop almost 15% this year, but a quick rebound in 2010 is expected.