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Ethernet Switch Market Gains 1% in Q2; Router Market Strong

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According to a recent report by International Data Corporation (IDC), the global Ethernet switch market (Layer 2/3) has gained a mere 1% year over year and 7.6% quarter over quarter to $5.8 billion in the second quarter of 2015.

From a geographic standpoint, the Ethernet switch market performed its best in North America, gaining 5.1% year over year and 13.7% quarter over quarter. Meanwhile, even with a 12.3% sequential increase, Asia Pacific including Japan (APJ) witnessed a year-over-year drop of 2.4%. Astonishingly, Latin America – usually a solid market – witnessed a 2.9% year over year and 5.1% sequential decline. The Europe, Middle East & Africa region (EMEA) was also comparatively weak, retreating 2.4% year over year and 3.2% quarter over quarter.

Although 10Gb Ethernet switch port shipments improved a healthy 16.4% year over year, revenues at this segment declined 3.9% year over year and fell to just below $2.1 billion. In the second quarter, nearly 7.3 million ports were shipped, while average selling prices continued to plummet. Also, 40Gb Ethernet revenues came in at in excess of $500 million, highlighting an impressive increase of 59.7% year over year.

Interestingly, IDC believes that the growing demand for 10Gb and 40Gb Ethernet switches is expected to propel growth in this market in the near term.    

Meanwhile, the global router market saw revenue growth of 11.5% in the reported quarter, annually and sequentially, thereby hinting at the market picking up momentum after the recent year-over-year declines. Notably, both the enterprise and service provider segments saw meaningful improvement. While the enterprise segment revenues increased 8.3% year over year and 7.7% quarter over quarter, the service provider segment improved 12.5% year over year and 12.7% sequentially.

Notably, as per the IDC report, in terms of specific vendors, Cisco Systems, Inc. (CSCO - Free Report) is right at the top. In the second quarter, Cisco’s share in the Ethernet switching market was pegged at 59.9%, up marginally from 59.4% in the year-ago quarter. Also, Cisco’s revenues at the router market increased 14.9% on a year-over-year basis. Notably, Alcatel-Lucent also controls a significant stake in the Ethernet switch market.

Meanwhile, Hewlett-Packard Company (HPQ - Free Report) commands a 9.5% market share as at the end of the second quarter, compared with 9.9% in the year-ago quarter. However, the company’s Ethernet switch revenues fell 2.6% year over year. On the other hand, Juniper Networks, Inc. (JNPR - Free Report) saw a 6.9% year-over-year growth in Ethernet switch take up in the quarter. Meanwhile, the company’s router revenues declined 4.5% year over year.

Further, the report indicates a bright future for the Ethernet switch market, as the latest standards of higher speeds like 25Gb, 50Gb and 100Gb Ethernet are likely to make up critical mass over the next few years.

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