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  Computers > Telecomunication > Communication
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Cisco slips in key router market

Routing leader Cisco Systems slipped in an area key to its overall networking dominance, while rival Juniper Networks scooped up a larger share of that growing market.
Market statistics for the third quarter of calendar 2004 have been tallied, and several market research firms are reporting that Cisco is losing market share, especially at the high end. Cisco indicated as much when it reported earnings earlier this month.

For the third quarter, Cisco's market share dipped to 58 percent, down from 72 percent during the same quarter of the previous year, according to Infonetics Research. Juniper's market share shot up to 36 percent from 20 percent for the same quarter the previous year.

Data from other research firms, such as the Dell Oro Group, indicate a similar trend. According to Dell Oro, Juniper's revenue from high-end core routers jumped to 38 percent from 32 percent in the previous quarter. Core routers are used by telephone companies and Internet service providers to shuttle traffic across the Net. These high-end devices, which can range in price between $450,000 and $1 million, are significant money-makers for Cisco and Juniper.

While Cisco's business in core routers increased 25 percent from the previous year, its market share dipped to 62 percent from 67 percent in the same quarter a year before.

The good news--for both companies--is that the market for these high-end devices that shuttle traffic across the Internet is growing and has been for the past six quarters. Compared with the third quarter last year, the core router market is up about 33 percent to $347 million, according to Dell Oro.

Increased demand for new Internet-based services from consumers as well as business customers is driving the demand, analysts say. In the United States, big phone companies such as Verizon Communications and SBC Communications have already begun upgrading networks. Throughout the world, especially in Asian countries such as China and India, carriers are building new infrastructures.

But even with increased demand, Cisco seems to be struggling to maintain its stronghold on the market. Some experts attribute part of Cisco's recent market share declines to a shift in its product cycle. Cisco announced its new high-end product, the CRS-1, in May, but only recently started shipping it. The company says it has four paying customers and is in 14 trials at the moment.

"Once the CRS-1 starts shipping in volume, I think we will have a better picture of where the market is moving," said Kevin Mitchell, an analyst with Infonetics.

Cisco says it's pleased with its position in the core router market, and that it isn't worried that it's losing market share.

"While we have healthy respect for our competition, no other company can match Cisco's blend of world-class technology innovation and customer support across all routing markets," said Jim Brady, a Cisco spokesman.

Juniper CEO Scott Kriens recently told CNET that he isn't paying much attention to quarterly dips and gains in market share.

"It's important to look at the trend line," he said. "It depends on whose research you look at, but almost every one of them shows the slope of that market share shift is positive for Juniper. Frankly, I would rather see a bigger market for everybody, but in the meantime, we will take share."

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