Ethernet switching declined 8% in the first quarter from last year, and 12% from Q4 2010, according to bulletins issued by two investment firms in recent days. And given Cisco's weak outlook for its fiscal fourth quarter, the market may languish in the quarters ahead.
Worldwide revenue in Ethernet switching was $4.7 billion in Q1, according to the bulletin from UBS. Layer 2/3 revenues were $4.4 billion, which was down 9% from Q1 of last year and 12% from Q4. Layer 4-7 revenues were $313 million, up 12% from last year but down 8% from Q4.
The average selling price of 10G, 1G and 100Mbps ports dropped 7.7% in Q1 from Q4, reflecting a poor geographical mix -- less US sales -- and rising pricing pressure, according to Oppenheimer & Co.
Cisco's share in Layer 2/3 dipped to 69% from 71% in Q4 due to the product transition underway and heightened competition. Cisco's switching sales slipped 15% from Q4, to $3 billion, according to Oppenheimer.
HP's share climbed to 12% from 10%, even though revenues were essentially flat. And Juniper lost a bit of share - to 2% from 2.2% -- as customers contemplate the transition to the new QFabric line.
But HP and Juniper may face more significant challenges, according to Oppenheimer.
Juniper's revenue dropped 23.3% in Q1, to $90 million, due to heavy discounting and lackluster 10G data center sales. Writes Oppenheimer analyst Ittai Kidron:
While the QFX3500/QFabric could be somewhat to blame, we're concerned Juniper isn't investing enough in its sales engineering to support data center traction.
(HP) is at risk of falling behind if it doesn't fill in its data center portfolio gaps by year-end.
One company that filled a data center switching gap is IBM. Its BLADE Network Technologies acquisition grew revenue 25% in Q1 and gained .5% of market share, to 1.3%. Brocade gained a bit of share but saw revenue dip, according to UBS. Oppenheimer has Brocade tied with Juniper at 2% share in Q1.
And despite its own challenges, Cisco has yet to be challenged in data center switching, according to Oppenheimer. The company "defended very well" it 10G position, and the firm expects Cisco to regain share in Q2 will a strong push in its fiscal Q4.
Even so, Oppenheimer expects the Layer 2/3 market to contract 1.4% in 2011 to $19.5 billion:
We don't believe other vendors can offset Cisco's shortfall and drive market growth. Our 2012 outlook calls for slight growth to ~$20.0B. Overall, we expect the vendors to concentrate their efforts on the key battleground-top-of-rack 10GbE market.
In Layer 4-7 switching, Cisco dropped back to 15% share in Q1 after climbing to 21% in Q4. F5 is now at 49% share from 45% in Q4, and Citrix held its own at 14%. Of all of the markets Cisco might look to divest to get back on track in fiscal 2012, Layer 4-7 switching would be an obvious and understandable one.
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The Cisco Subnet blog is written by Network World managing editor Jim Duffy Visit the Cisco Subnet home page daily and while you are there, subscribe to the Cisco Alert e-mail newsletter, which includes news and views generated by the Cisco Subnet community as well as Cisco-related stories on Network World and elsewhere on the Web.
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