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Ethernet Switch Market Flat to Slightly Positive, Growth Indicators for Router Market from IDC's

The worldwide Ethernet switch market (Layer 2/3) totaled $5.4 billion in the first quarter of 2015 (1Q15), representing an increase of 1.4% year over year and a decrease of -13.8% quarter over quarter. Meanwhile, the worldwide total enterprise and service provider router market continues to rebound from recent year-over-year declines, growing 7.7% year over year, although declining -8.3% sequentially. These growth rates are according to the results published in the International Data Corporation (IDC) Worldwide Quarterly Ethernet Switch and Router Trackers.

From a geographic perspective, the 1Q15 Ethernet switch market results represented especially strong growth for the Middle East and Africa (MEA) region, which increased at 18.8% year over year, despite decreasing -7.1% quarter over quarter. MEA countries showing particular strength were Qatar (up 90.8% year over year) and Saudi Arabia (up 40.4% year over year). Western Europe also saw relatively strong results, increasing 6.3% year over year, led by strong performances in Italy (up 31.9% year over year) and Belgium (up 18.2% year over year). A similar regional growth story was seen in North America, where year-over-year growth came in at 5.6% year over year, buoyed by the US growth rate of 5.8%.

Latin America was somewhat flat in 1Q15, with 0.6% year-over-year growth, despite impressive gains in Peru (up 29.5% year over year) and Colombia (up 9.1% year over year). Asia/Pacific (excluding Japan) (APeJ) was also flat, recording year-over-year growth of 0.1% in 1Q15. Impressive gains in South Korea and India (up 42.1% and 15.2% year over year, respectively) could not offset a -10.4% year-over-year decline in China. Central and Eastern Europe (CEE) saw a significant decline as its market contracted -18.7% year over year. This was largely due to a -34.8% year-over-year decline in Russia. The most significant regional decline was in Japan, as its Ethernet switch market fell -27.7% year-over-year, partially due to ongoing currency fluctuations.

"The first quarter was a story of the ascendance of 40Gb Ethernet. As other market segments declined due to general economic softness factors and the normal first quarter seasonality, powerful growth in the 40GbE segment lifted the overall market," said Rohit Mehra, Vice President, Network Infrastructure, at IDC."1Gb and 10Gb Ethernet should see a rebound in the second quarter given the increasing demands on enterprise networks from core to edge, but the strength of the 40Gb segment demonstrates the ongoing growth of large-scale public and private clouds."

10Gb Ethernet switch (Layer 2/3) revenue decreased -2.9% year over year, coming in at just under $2.0 billion while 10Gb Ethernet switch port shipments grew a robust 23.9% year over year with nearly 6.3 million ports shipped in 1Q15, as average selling prices continue to fall. 40Gb Ethernet now accounts for over $500 million per quarter in revenue for the second consecutive quarter, growing 88.0% year over year. 10Gb and 40Gb Ethernet are expected to continue to be the primary drivers of the overall Ethernet switch market moving forward.

The worldwide enterprise and service provider router market increased 7.7% year over year in 1Q15. However, performance of the key segments within the router market varied widely with the larger service provider segment increasing notably at 9.9% year- over year, whereas the enterprise segment stabilized from recent declines, growing 1.3% year over year.

The combined enterprise and service provider router market also saw varied performance on a regional basis. Latin America led all regions with a robust 30.6% year-over-year growth rate. MEA also saw strong growth in routers, increasing 23.0% on a year-over-year basis. Western Europe grew 14.1% year over year and North America increased by 8.0% over the same period in 2014. Moderate growth was seen in APeJ at 6.3% year over year. CEE saw a declining market, contracting -5.9% year over year. Japan, again effected by currency fluctuations, saw its router market contract -21.8% on a year-over-year basis.

From a vendor perspective, Cisco saw a strong 1Q15 in L2/L3 Ethernet switching that led to 5.5% year-over-year growth as its market share rebounded to 62.4% from 60.5% in 4Q14. Cisco's share stood at 60.0% in 1Q14. In the hotly contested 10GbE segment, Cisco held 61.1% of the market in 1Q15, up from 58.7% in the previous quarter, and slightly down from the 61.8% held in 1Q14. Cisco's service provider and enterprise router revenue increased 10.3% year over year.

HP's Ethernet Switch revenue decreased -6.4% year over year and -23.2% quarter over quarter in 1Q15. HP's market share in switching fell to 8.3% from 9.4% in 4Q14 and also from the 9.0% share seen in 1Q14.

Juniper experienced a down quarter in Ethernet switching with a year-over-year decline of -6.4% in 1Q15, while rising 1.5% sequentially. Its router revenue declined year over year for the third consecutive quarter, falling by -9.7% on a year-over-year basis.

"Falling switch port prices dampens overall market growth, even as port shipments, especially for 10Gb and 40Gb Ethernet, steadily increase," said Petr Jirovský, Research Manager in IDC's Networking Trackers Group. "The more recent emergence of 100Gb Ethernet shows just how important greater speeds and capacity will be to future overall market growth."

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