FRAMINGHAM, MA – The worldwide Ethernet switch market produced revenues of $5.8 billion in the second quarter, up 1% year-over-year and 7.6% sequentially, says International Data Corp.
Meanwhile, the worldwide total enterprise and service provider router market continued to rebound, with growing revenues growing 11.5% year-over-year during the quarter and 11.5% sequentially.
The second-quarter Ethernet switch market performed best in North America, which grew 5.1% year-over-year and 13.7% sequentially. Asia/Pacific including Japan (APJ) saw a decline of 2.4% compared to the second quarter of 2014, despite a 12.3% sequential increase. Latin America, normally a strong growth market, declined 2.9% year-over-year and 5.1% sequentially. The Europe, Middle East & Africa region declined 2.4% compared to the same quarter last year and 3.2% sequentially.
"Overall revenue and port shipment growth was weaker than expected in the second quarter. Even the relatively strong 10Gb segment saw weaker results than expected," said Rohit Mehra, vice president, Network Infrastructure, at IDC. "Given the increasing workloads traversing networks across the enterprise, data center, and with service providers, this weakness is likely the result of anticipation for and delayed decision-making around newer and emerging speeds, the intensifying competitive landscape, and of course, continued macroeconomic concerns."
10Gb Ethernet switch revenue decreased 3.9% year-over-year, coming in at under $2.1 billion, while 10Gb Ethernet switch port shipments grew 16.4% compared to the second quarter of 2014, with nearly 7.3 million ports shipped, as average selling prices continued to fall. 40Gb Ethernet revenue came in at over $500 million for the third consecutive quarter, growing 59.7% year-over-year. 10Gb and 40Gb Ethernet are expected to continue to be the primary drivers of the overall Ethernet switch market in the near-term. 1Gb Ethernet switch revenue declined slightly (1.5% year-over-year) as this segment continues to face price erosion, says IDC.
The worldwide enterprise and service provider router market increased 11.5% year-over-year in the second quarter. Contrary to the previous quarter, both the enterprise and service provider segments saw strong growth. The enterprise segment increased 8.3% year-over-year and 7.7% sequentially. The service provider segment grew 12.5% year-over-year and 12.7% sequentially. This will be a market to watch closely over the coming quarters, as software-defined architectures start to take hold across the WAN, enabling network managers and service providers alike to benefit from these emerging capabilities, says IDC.
The combined enterprise and service provider router market also saw strong performances across the regions. Latin America led all regions with a 26.7% year-over-year growth rate and 25.1% sequential growth rate. APJ also saw a positive quarter, growing 8.9% on an annual basis in the second quarter. North America increased 11.3% year-over-year. EMEA saw routers as a bright spot in an overall dampened enterprise networking market, with a year-over-year growth rate of 10.4%.
Cisco finished the quarter with 1.9% year-over-year growth in the Ethernet switching market and market share of 59.9%, up slightly from its 59.4% share in the second quarter of 2014. In the hotly contested 10GbE segment, Cisco held 57.5% of the market in the second quarter of 2015, down from 61.1% in the previous quarter, and from the 60.9% it held in the same period last year. Cisco's service provider and enterprise router revenue increased 14.9% year-over-year.
HP's Ethernet switch revenue decreased 2.6% year-over-year, but grew 22.9% sequentially. HP's market share in switching rose to 9.5% from 8.3% in the first quarter of 2015, but was down from the 9.9% share it held in the second quarter of 2014.
Juniper rebounded from a down first quarter in Ethernet switching with a year-over-year increase of 6.9% and sequential growth of 15.5%.
Its router revenue declined year-over-year for the fourth consecutive quarter, falling 4.5% on a year-over-year basis, despite increasing 18.8% sequentially.
"Falling switch port prices have a flattening effect on overall market growth, even as demand for switches, especially 10Gb and 40Gb Ethernet switch ports, increases," said Petr Jirovsky, research manager in IDC's Networking Trackers Group. "As newer standards at higher speeds such as 25Gb, 50Gb, and 100Gb Ethernet grow to critical mass over the next few years, one can expect this segment to stay dynamic and interesting for the foreseeable future."