The worldwide market for carrier routing and switching equipment decreased 5.1% quarter over quarter during the first three months of 2014 but increased 5.9% year on year, according to the latest figures from market research firm ACG Research. The firm attributed lackluster spending to first-quarter seasonality.
“This decline is in line with what we expected,” said Ray Mota, router and switching analyst at ACG Research of the typical first quarter downturn. “We are also seeing a shift in capex spending from wireline to wireless, and as well as the overall allocation for mobility continuing to increase.”
The core routing segment posted a 9.0% decrease quarter over quarter but was slightly up by 0.3% year-on-year, the analysts found. Although there was significant softening in the core space, carriers continue to carry out upgrades.
The edge/switching segment also decreased 4.1% quarter over quarter but finished up by 7.4% year on year. The service provider edge market is benefiting from the diversity of applications and services, requirement variations in the regions, cross-technology platforms, and the move to 100 Gigabit Ethernet on routers and 100G in optical transport, the analyst says.
New and innovative services will continue to move the market. Technologies such as software-defined network (SDN) and network functions virtualization (NFV) are on the horizon. What gets virtualized and what stays physical will affect the transition from equipment to software. The key drivers will be more than just cost on scale and capacity; service velocity and increasing average profit per user will also drive this move. During that transition, established technologies such as Carrier Ethernet and 100G will drive growth in wireline, and LTE and small cells will drive growth in wireless.
In terms of market share in 1Q 2014, Cisco Systems Inc. (NASDAQ: CSCO) ranked first, having seen a 2.1% and 4.4% revenue growth compared to the previous quarter and year-ago quarter, respectively.
Alcatel-Lucent (Euronext Paris and NYSE: ALU) ranked second, Juniper Networks, Inc. third, and Huawei Technologies Co Ltd. fell in fourth place. All three saw a seasonal decline in revenues but were up in year-on-year results. Huawei saw a large first-quarter loss, with routing revenues decreasing by 39.4% sequentially, but nevertheless managed a 19.8% increase year-over-year.
Meanwhile, Brocade Corp. reported that carrier switch/routing revenues declined both sequentially and year over year by 13.7 and 11.2 percent, respectively.
Mota says that vendors will need to address the long-term demand for high-performance and innovative networks and architectures that address interconnected data centers. Interconnected data center network architectures are being reconfigured to respond to traffic volumes and changing traffic patterns. The architectural challenges include cost-effectively accommodating this rapid traffic expansion, delivering network flexibility, and enabling service innovation.
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