Cisco gaining back switching share lost in 2009

Big Q1 sees company increase share by 4%

By Cisco Subnet on Tue, 05/25/10 - 9:35pm.

The Layer 2/3 switching market is on track to approach $17 billion this year, having grown almost 11% sequentially in Q1 to over $4.8 billion. Cisco gained share across all segments in the market having taken share from every other vendor while adding 4% to its leadership position, according to Oppenheimer & Co.

Citing data from IDC, company reports and its own analysis, Oppenheimer says momentum in the quarter was driven by improved spending and upgrade demand for 1G and 10G Ethernet. In what is perhaps an indication of the demand for 10G, Extreme Networks says shipments of its fixed 10G Ethernet ports almost doubled in Q1 over Q4, '09. This outpaced its competitors, Extreme said, citing data from Dell'Oro Group.

An easing of supply chain constraints, which impacted Cisco the past few quarters, also drove the market, Oppenheimer notes. Reducing product lead times allowed Cisco to regain market share lost in 2009, Oppenheimer states - which was a focal point of the company this year.

Cisco's share of the Ethernet switch market now stands at 74.5%, up from 70.6% in Q4 '09, Oppenheimer states. The firm expects Cisco's business to "normalize" in Q2 but still expects the company to gain share in 2010 over 2009.

Rival Juniper, meanwhile, saw its business pause in Q1 after gaining share every quarter since entering the market in early 2008. It posted only $2 million in switching revenue sequentially -- $74 million vs. $72 million in Q4 - but Oppenheimer nonetheless expects Juniper to gain share in 2010.

HP and 3Com both saw share slip in Q1. HP, which dropped to 6% from 6.8% sequentially, was impacted by Cisco's gains and by softness in its blade switching business, according to Oppenheimer. 3Com was hit by softness in its China business which was offset somewhat by strength in Europe. Its share stood at 3.5% in Q1.

Despite a rebound in its Ethernet/IP business in its fiscal second quarter - up 34% sequentially to $128 million - Brocade is still challenged. Year-over-year the business was essentially flat while the rest of the market grew 40% from calendar Q1 09 to 2010. Brocade lost .5% share from Q4 and now stands at 1.6%, according to Oppenheimer. Oppenheimer believes Brocade's weakness is indicative of poor execution and increased competition.

The firm expects the switching market to grow 10% in 2010 and 7.5% in 2011, to $16.7 billion and $18 billion, respectively. This is up from its prior forecasts of 4% and 5.5%:

Our upward revision reflects the strong 1Q10 performance, catch-up spending and strong upgrade activity. If macro conditions remain healthy, we see potential upside to our estimates. We note that our 2011 estimate still remains below the $18.2B achieved in 2008.