|CAHNERS IN-STAT RESEARCH HIGHLIGHTS|
The global network market shifted significantly in 1998, indicating that we have started a real move to voice and data convergence, according to a research report by Cahners In-Stat Group, a division of Newton, Mass.-based Cahners Business Information. This fact ought to send network architects, MIS directors, and other systems buyers back to the request for information (RFP) drawing board as they assess who are the leaders in this emerging arena.
"The data-networking landscape took on a new look in 1998 as traditional voice-equipment providers became heavy hitters in providing data-networking equipment," said senior analyst Emmy Johnson. "Players such as Lucent and Nortel strategically acquired networking companies to sharpen their competitive edge by expanding their product portfolio to include data-networking products."
The acquisition of Bay Networks by Brampton, Ont.-based Nortel Networks Corp. in mid-1998 represented the first major crossmarket acquisition at $9.1 billion, combining a relatively complete networking equipment portfolio with one of the world's largest suppliers of voice equipment. The stated goal of the merger was to provide the ability for IP-integrated networks to carry voice, data, and video from desktop to desktop across the LAN, WAN, and carrier backbones. The market share results for 1998 showed a slight dip in Nortel Network's revenues in comparison to combined revenues for the two companies in 1997. Thus, 1999 will be the telling year as the company attempts to put integration issues behind it, and proceeds with new products to address the multiservice IP opportunity.
Bay Networks was finally on the recovery path after several years of turmoil following its acquisition of Synoptics and Wellfleet. This new integration will be with a much larger company and will present additional cultural and channel-oriented challenges.
| Worldwide networking equipment market shares |
Cisco Systems Inc., of San Jose, Calif., and 3Com Corp., of Santa Clara, Calif., continued to lead the networking market revenue shares with 29.2% and 16.4% market share respectively. Cisco's presence in LAN packet switching, dominance in routers and success in the ATM WAN switch and remote access markets resulted in 26% revenue growth, higher than the industry average of 18%.
3Com's much publicized inventory problems resulting from its acquisition of U.S. Robotics slowed the number two player's overall growth. In addition, half of 3Com's revenue is derived from NICs and modems, which experienced volume growth, but significant price declines over 1998. 3Com does not have an ATM WAN portfolio and has been lagging in access concentrator sales to the emerging service provider sector, which also impacted overall sales growth.
The acquisition of Ascend Communications by Murray Hills, N.J.-based Lucent Technologies Inc. also represents a change in the market. Ascend made considerable headway in 1998, growing revenues 30% with a portfolio comprised primarily of access concentrators and ATM and multiservice WAN switching. Lucent has been actively acquiring companies over the last year in an effort to expand its networking portfolio.
Lucent's market share is still under 1%, although the Ascend acquisition will place it firmly on the map. Ascend fills the gap in Lucent's product line with its multiservice switching products. Further, the combination of Lucent's carrier channels and Ascend's presence in the service provider space makes for a daunting competitor.
Even while all the mergers and acquisitions continue, 1999 will be a banner year as IT customers start taking the voice and data world seriously and as large orders start rolling in.
The 1999 State of the Networking Market Review outlines trends for 1999 and forecasts the revenue growth by major equipment product segments by quarter and for year-end 1999. The report also includes 1999 overall networking equipment revenue market shares for the top 24 vendors and geographic equipment shares for the major equipment segments.