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Service provider kit sales to hold steady in '04

Fierce price competition

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Sales of high-end networking equipment to service providers jumped in the second half of the year, delivering some respite after a dismal 18 months for makers of switches and routers.

Sector sales were $1.4bn in the last quarter of 2003, up 13 per cent year-on-year and the second consecutive quarter to produce 13 per cent growth.

But before Cisco, Juniper et al break out the bubbly, total revenues of service provider routers and switches were $4.8bn in 2003, down nine per cent from the miserable performance of 2002.

The decline was led by a 23 per cent drop in multiservice switch revenue, as IP/MPLS took over the reins as the key investment driver. But service provider routers grew just two per cent from 2002, according to Infonetics Research's quarterly worldwide market share and forecast service, Service Provider Routers and Switches. It forecasts the value of this market will now grow at an annual rate of 16 per cent to reach $8.6bn in 2007.

Kevin Mitchell, Infonetics's lead analyst of the survey, reports that few vendors anticipate an general upturn in capital expenditure, but they "do expect their own revenue to grow by taking market share from other players and through new market expansion, such as to China or mobile wireless."

"This scenario makes for a very competitive market and may lead to intense price competition...But in 2004 the market will stabilize and begin to grow again as incumbents prepare for data network convergence and look for cost reductions and greater port density in multiservice switches."

Leader of the Pack

Cisco is the big leader in the service provider router and switch sector, increasing share from 44 per cent in 2002 to 48 per cent in 2003.

Nortel retained second place, increasing share from 14 per cent to 15 per cent of the market, while Juniper accounted for 12 per cent share to claim third place.

Lucent held on to fourth place, but its share declined from 10 per cent to six per cent. One of the biggest losers in the sector was Alcatel which saw its overall ranking drop to fifth, while market share plummeted from 10 per cent to six per cent. ®

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