Networking hardware market reaches record sales

Worldwide networking hardware sales reached record highs in 1999 and it's only going up in 2000.


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When the 1999 third quarter numbers came in, sales in the networking equipment industry were up, way up. The worldwide networking hardware market reached $9.35 billion in the third quarter of 1999, a 16% increase over the same period in 1998, according to a new report from Cahners In-Stat Group, a division of Newton, Mass.-based Cahners Business Information. In-Stat expects the networking market to end 1999 at $36.8 billion, a 17% jump from the previous year and an all-time high.

1999 Network equipment market share by product segments
Source: Cahners In-Stat Group

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Growth in the third quarter was largely driven by Layer 3 switches, access concentrators, and emerging equipment markets. While slower sales growth is forecast in the fourth quarter of 1999 (an anemic 2% for a total of $9.5 billion), sales are expected to grow in 2000, impacted by the following factors:

  • Although small and medium-sized businesses will fuel growth in the fourth quarter as they panic purchase for Y2K, this trend will not counteract sluggish purchasing from large businesses that are freezing or reallocating equipment budgets.
  • In-Stat predicts a return to robust market growth for networking equipment in the first two quarters of 2000, to be witnessed by 8.5% growth in the first quarter and 10% growth in the second quarter. Much of the growth will be the result of large company backbone purchases and continued service-provider build outs.
  • High priced access, backbone, and core networking gear will continue to drive revenue growth in response to increasing bandwidth requirements in the enterprise, as well as an increase in network outsourcing.
  • Increased rollouts of broadband services will drive bandwidth requirements at the edge and core of the network, spurring continued investment and upgrades in equipment.
  • In addition, several new product categories will fuel growth of networking hardware revenues in 2000, including voice over Internet protocol (VoIP) gateways and digital modems.

The big players dominate the networking market. The top four vendors--3Com Corp., Cisco Systems Inc., Lucent Technologies Inc., and Nortel Networks Corp.--represented over 70% of networking revenues in the third quarter. San Jose, Calif.-based Cisco led the way with 38% of the market, followed by based 3Com, of Santa Clara, Calif. (14%), Nortel Networks, in Brampton, Ont., (13%), and Murray Hill, N.J.-based Lucent (8%). Increasingly, voice and data convergence is affecting the nature of competition in the networking market. Vendors with strong voice and data portfolios are rising to the top.

North America continues to dominate network hardware sales with purchases totaling 55% of the worldwide market, but other areas are gaining in prominence. In the third quarter, networking hardware sales to Europe reached 27% of the worldwide total, with Asia Pacific next with 12%. In 2000, In-Stat expects that the combined sales of Europe, Asia, and Latin America will total more than half of the worldwide market. These areas will face the same network expansion experienced in North America over the past three years.

Report information

The worldwide networking equipment market reached $9.35 billion in the third quarter of 1999, a 16% increase over the same period last year, resulting in a record quarter. In-Stat expects the networking market to end 1999 at $36.8 billion, an all-time high. Part of a new quarterly service, the Quarterly Networking Review analyzes technology and market trends impacting the overall networking hardware market.


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