Another good quarter for Ethernet switching

The market for Ethernet switches continued to gather strength in the second quarter of this year, according to a new report from Dell’Oro Group.

The Ethernet switch market is “operating at a new higher level,” said Seamus Crehan, director of the firm’s Ethernet switch research, in a statement. Revenue and port shipments were flat from the first quarter to the second, but the first quarter had had quite a jump, at 16%. Revenue in the second quarter was $3.1 billion.

Revenue in the first half of this year was 20% higher than those in the first half of 2003. As a result, Dell’Oro says, the market for Ethernet switches is destined for double-digit growth for the full year.

Dell’Oro credits the renewed interest in Ethernet switching to “pent-up demand after several years of reduced IT spending.” New technologies, like power over Ethernet, are also fueling the growth.

Interestingly, the average sales price of much Ethernet gear inched up, probably because more features are being added to the devices, and vendors are charging for them.

In related news, another analyst firm, CIR, predicted the Ethernet switch market will rise to $15 billion in 2008.

CIR sees Dell as a key competitor to Cisco as the market grows. The firm notes that 40% of Cisco’s Ethernet sales come from entry-level products and stackables, and that Cisco does very well in large part because of its extensive reseller network. At the low end, Dell could compete with Cisco, since high-volume, low-cost hardware is Dell’s specialty. And Dell has something other network hardware makers don’t: lots of cash. Cisco has $20 billion in net cash and liquid investments, which CIR says is five times the combined total that Juniper, Foundry, Extreme, 3Com, and Nortel have. But it’s only twice what Dell has.