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CIR Says Ethernet Switching Market To Surpass $15B In 2008

CIR, a market research and consulting firm, released a report on the global Ethernet switching market that projects a market opportunity of $15.1 billion in 2008. The report also provides a market share analysis of the U.S. market that includes industry verticals of health care, financial services and government.

Finally, A Contender?

The fact that its competitors have tried to tackle high-speed, high-capacity networks has allowed Cisco to maintain very high overall market share because the low end of the market still provides a huge revenue stream. About 40 percent of Cisco's Ethernet sales come from entry-level products like the Cat 2950 and stackables like the 3500 series. Cisco's lead in this market does not come from technology, but rather because of its large reseller network. Even if another company could build a better 24-port CPE box, it would never have the distribution Cisco does. However, according to CIR's report, while Cisco shows no signs of losing its overall dominance of the Ethernet switch market, it now faces a well-funded rival that is targeting Cisco's high margin low-end switching business.

While longtime Cisco rival, 3Com, was shoved into the low end of the market, Dell, on the other hand, has chosen to attack it. Dell's business success has been predicated, in part, on building hardware at lower costs than its rivals. Dell can also challenge Cisco's supremacy in low-end fixed switches by relying on direct sales channels, including its web site, to drive down costs to a point where Cisco's ability to command high margins is being threatened. CIR also points out that Dell has one important advantage over Cisco's niche competitors -- cash. Cisco's $20 billion of net cash and liquid investments is about five times the combined total of Juniper, Foundry, Extreme, 3Com and Nortel, but it is not quite twice the $11 billion sitting in Dell's bank accounts.