Nortel losing market share in edge routers
Juniper Still Creeping Up on Cisco, Dell'Oro Report Says
By Scott Moritz
Senior Writer
2/21/01 7:18 PM ET
Networking challengers are prospering, though the longtime leader is hardly
down for the count.
Juniper Networks (JNPR:Nasdaq - news) is continuing to chomp into Cisco
Systems' (CSCO:Nasdaq - news) lead in the Internet router market, though
not quite as much as some observers had expected, according to figures from
a leading market researcher. Meanwhile, Redback Network's (RBAK:Nasdaq
- news) edge-of-the-Internet router is knocking the wind out of Nortel
Networks' (NT:NYSE - news) sails, just as the big telco gear maker tacks
upstream.
Juniper amassed 34% of the core router market in the fourth quarter, up 4
points from third-quarter levels, while Cisco's share fell to 65% from 69%,
according to the Dell'Oro Group. Core routers are networking gear that sit
inside the Internet and act like mail sorters, sending info to addressed
destinations. The total core router market in the fourth quarter was valued at
$836 million, a 23% increase over the previous quarter.
Meanwhile, in the edge router market, Redback swiped a whopping 7.5 points
last quarter, raising its share to 45% from 37%. Nortel lost 11 percentage
points of business, falling to a 23% share from 34% in the third quarter. Edge
routers are considered aggregators or on-ramps to the Internet, generally at
the point where local traffic meets the long-distance or "backbone" routes.
The edge router market was $177 million in the fourth quarter, a 7% increase
sequentially.
Challenges
What is notable about these figures is how quickly Juniper has risen in the 2
1/2 years since it introduced a product to compete against Cisco, which had
the market to itself for some time.
Core Routers
Source:
While Cisco has said that losing 40% market share was unacceptable and
that holding 70% is its goal, the core router business accounts for only 6% to
8% of Cisco's total revenue, according to SG Cowen's Michael Jung, who
has a strong buy on Juniper and a buy on Cisco. Jung adds that Juniper's
gains don't pose a serious threat to Cisco's health.
Juniper may also be greatly challenged in taking more of Cisco's business.
Cisco introduced its Juniper-killer router last month and says it has already
signed on big customers such as AT&T (T:NYSE - news), AOL (AOL:NYSE -
news), Sprint (FON:NYSE - news) and 360Networks (TSIX:Nasdaq - news).
Edge Routers
Source:
And as Juniper's chairman and CEO, Scott Kriens, suggested last week, the
rivalry between his company and Cisco may yet escalate into a price war,
since neither company is keen on giving ground.
Also notable in the Dell'Oro report is the debut of Avici (AVCI:Nasdaq - news)
as the distant third-place player in the core router market, with about 1% of
the business. Avici has made inroads with big telco and investor AT&T this
quarter, so its numbers are likely to improve at the expense of Cisco and, to a
lesser extent, Juniper.
This Is the Edge
In the edge router category, Redback dealt Nortel a significant blow, which
falls on the heals of a rather troubling indications on the optical networking
front where Nortel has missed a product cycle in optical switches and
watches idly as Ciena (CIEN:Nasdaq - news) takes a dominant lead in the
field.
Cisco managed to hold on to its 16.5-point market share in edge routers last
quarter.
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