Wednesday, May 22, 2024

The Telecom Ripple Effect

Datamation content and product recommendations are editorially independent. We may make money when you click on links to our partners. Learn More.

A report released yesterday by the Dell’Oro Group show sales of high-end
routers and switches, the equipment used to manage and move data traffic on
national and international networks, has taken a plunge in recent months.

It proves what everyone in the telecommunications industry already knows
but was too afraid to ask — carriers are pulling back from big network
builds and focusing on what they already have to shore up losses, which
puts equipment makers in a bind.

Overall, the worldwide router market saw a six percent decline in sales, to
$1.5 billion, due mainly to a lag in pricey router sales, according to the
Dell’Oro report. Wide area network (WAN) switch makers saw a similar six
percent decline to $639 million.

The top three router makers — Cisco Systems, Inc. ,
Juniper Networks and Unisphere Networks (which was
acquired by Juniper in July) — all experienced negative growth in the
second quarter.

The biggest losses came with equipment delivering high-speed routing on the
“fat pipes” of bandwidth data delivery, the OC-192/STM-64 and OC-48/STM-16
networks. Cisco fared best, given its market share and number one ranking
in the switching industry, with only a six percent drop in sales growth.

Juniper and Unisphere both posted double-digit drops of 10 and 22 percent,
respectively, in the high-end routing category. Lucent Technologies
(-5%) and Alcatel (-12%) fared poorly in the
second quarter in switching sales.

But amidst the poor sales figures, some gems have appeared to offset the
losses in the routing and switching industries.

A sales gain of WAN routers — used by corporations and communities who use
T-1/E-1 lines to connect to the Internet — gained in the second quarter
among all the vendors selling the equipment.

Switches that convert voice traffic into data packets played a large part
in marginalizing the losses of the second quarter, with a four percent
gain. Nortel, with the largest market share in the switching industry, saw
a 41 percent boost in sales of the voice-to-data equipment.

Joshua Johnson, an analyst at Synergy Research Group, said equipment
vendors who could tap into the fixed Layer 3 market did very
well. Businesses are turning toward switching to manage their data
communications infrastructure, Synergy Research reports show; the result of
equipment that is now in the business price range.

“Vendor’s orders soared on customer demand for switches that can support IP
Telephony and that could accommodate their limited capital spending
budgets,” he said.

It’s likely equipment vendors will place more emphasis on the low-end,
infrastructure-type routers and switches going forward. In the past, the
money was made building the high-end routers and switches used by large
carriers like Level 3 , Global Crossing, Deutsche
Telekom and Qwest to manage their burgeoning networks.

None of these carriers are likely to build out much further than they
already are, though, given recent economic developments and the ongoing bandwidth
in the market.

Subscribe to Data Insider

Learn the latest news and best practices about data science, big data analytics, artificial intelligence, data security, and more.

Similar articles

Get the Free Newsletter!

Subscribe to Data Insider for top news, trends & analysis

Latest Articles