Roughly $19 billion was spent on routers and switches last year as companies continued to upgrade their infrastructures.
And the market for routers and switches is positioned to reach nearly $25 billion by 2009, according to a pair of recent studies by Infonetics Research.
That growth was spurred in part by the impressive jump in sales of two components within these market segments: secure routers and layer 2 and layer 3 Ethernet switches.
The secure router market jumped an astounding 121% in 2005, and overall router unit shipments were bumped up 14%. Overall enterprise router revenue, however, slipped from $3.4 billion in 2004 to $3.3 billion last year despite the strength of global demand. That slip was caused by vendors reducing prices amidst fierce competition, the study suggests.
"Overall the enterprise router market had a good year," said Infonetics directing analyst, Matthias Machowinski. "Though revenue didn't quite keep pace with unit shipments, demand is solid."
In 2005 Cisco Systems Inc. still led the overall enterprise router market by a vast margin, with 81% of the worldwide revenue share and 71% of the unit share. Within the enterprise router market, Hauwei held the second place slot for secure router shipments and market share, while Nortel Networks ranked third in enterprise router revenue share, a spot it's held for six of the last eight years.
"The transition from standard to secure routers is speeding up, with secure router revenue skyrocketing and unit shipments practically tripling in the last year," Machowinski said. "The underlying fundamentals of the market are strong because companies continue to upgrade their networks and look for platforms that integrate security features, QoS [Quality of Service] and support for VoIP."
According to the report, the router market remained strong mostly because companies are upgrading their installed router base and continuing to connect branch offices and remote sites using IP.
During the last quarter of 2005, revenue was up because of a "product mix shift," meaning a larger number of high-end routers were shipped. The overall revenue was down because of competitive price pressure.
Despite the inconsistency, Infonetics predicted annual overall enterprise router revenue market will increase from $3.3 billion last year to roughly $4.5 billion in 2009, a 37% growth. Annual router unit shipments are expected to grow 41% between 2005 and 2009, passing the 2 million mark in 2007.
A second Infonetics study, which examined the switch market, found that worldwide layer 2 and layer 3 Ethernet switch revenue reached $15.3 billion last year, a 9% jump over 2004, while the layer 4 through 7 switch market jumped 26%, skyrocketing to $750 million. Combined, the switch market is forecasted to grow 27% between 2005 and 2009, surpassing $20.3 billion. Port shipments are also expected to grow faster due to price reductions.
"As organizations continued to build out and upgrade their aging infrastructure, they spent more than $19 billion on enterprise routers and switches last year," Machowinski said. "Overall, the market for enterprise networking gear remains healthy, with Ethernet switches doing particularly well."
The report points out that 273 million layer 2 and 3 Ethernet switch ports were shipped in 2005, 20% more than the year before. Revenue for layer 2 and 3 Ethernet switches was also up 4% for the quarter and revenue for port shipments was up 7%. Layer 2 and 3 Power over Ethernet switch revenue was also up, with ports up 16% in the fourth quarter.
For layer 4 through layer 7 switches, revenue jumped 19% between the third and forth quarters to $215 million, which was 28% higher than the same time in 2004. Unit shipments were up about 14% to roughly 13,000.