Cisco has regained lost ground in the European LAN Switch market, overtaking HP which had led the field in the previous quarter. That's according to research company IDC, whose quarterly EMEA LAN Switch Tracker keeps tabs on the leading switch vendors.
Last quarter, Cisco had lost its revenue market share to rival HP ProCurve, the other leading vendors being Nortel, 3Com and Extreme.
This year, Ciscos LAN switch market has grown in terms of revenue from $1.27 billion in Q4 of 2005, by 2.6 percent to $1.30 billion in Q1 of 2006 its highest in the last five quarters. The company, along with its Linksys subsidiary, also continued to lead in the overall port shipment market share, which increased from 31.0 percent in Q4 2005 to 35.3 percent in Q1 2006.
This is in keeping with IDC's previous report early this March, which said that in the fourth quarter of 2005 the LAN switch market in EMEA continued to grow in terms of both port shipments and revenues. The report had also shown that "In Q4 2005, fast Ethernet port shipments increased surprisingly by 10.2 percent to 14.3 million ports, and revenues increased 2.3 percent to $406.2 million. Gigabit Ethernet port shipments increased by 11.7 percent to 4.7 million ports and revenues grew marginally by 0.2 percent to $801.8 million in EMEA in Q4 2005."
But Cisco is not having it as easy as the figures suggest: This quarter there was an overall decline in Ciscos port shipments by 2.9 percent from 20.5 million ports in the Q4 of 2005 to 19.9 million ports in Q1 2006.
While fast Ethernet port shipments declined 5.6 percent to 14.9 million ports, and revenues decreased 2.3 percent to $397.1 million, Gigabit Ethernet port shipments increased by 6.2 percent to 5.0 million ports, and revenues grew by 5.4 percent to $845.4 million in EMEA.
Peter Hulleman, analyst with IDC, explained the trend: "The price premiums for Gigabit Ethernet are dropping when compared to fast Ethernet. Lifespan for a LAN switch is about 4 to 5 years. So when equipment needs to be replaced it makes sense for companies to go for Gigabit Ethernet even if they dont need it. It makes for good investment protection."
"Of course, bandwidth requirements with Gigabit Ethernet would increase, but the industry is expecting that fast Ethernet will decline. Although FE is being used for the end-user, more companies are increasingly using Gigabit Ethernet for their desktops as well. Hulleman added.
As a result, the average sales price of LAN switches in EMEA increased strongly by 5.6 percent to $65.3 per port during the quarter, compared to a decline of 8.9 percent in the third and fourth quarters in 2005, said the IDC report. The growth of the average sales price of LAN switches is largely the result of the good numbers from Cisco. This is due to the fact that Cisco sells a lot of high-end LAN switches that have a relatively high price, combined with the company's strong market leadership position. Another reason why the ASP increased was strong growth in the gigabit non-modular segment of the market.
"HP ProCurve did do very well in the last few quarters, but its problem is winning market share. Cisco is a company that makes very few mistakes. The moment its competitor is weak, it takes over. The company does slip once in a while but it also catches up fast, which is very impressive," Hulleman concluded.