CSCO buyout of AVCI plausible to compete against JNPR..............Cisco's Core-Router Share Slips
(02/23/01, 9:24 p.m. ET) By Meg Walker, TechWeb News
Figures from a market research group show that Cisco
Systems Inc. lost 4 percent market share for its core
router products in the fourth quarter of 2000 while
Juniper Networks gained 4 percent.
Though Cisco (stock: CSCO) still captured 65 percent
or a majority of the fourth quarter market share,
analysts say it is no surprise that Juniper, Sunnyvale,
Calif., is gaining on the networking giant, based in San
Jose, Calif., when it comes to high-speed WAN
routers.
"The marketplace knew it was coming," said Sam
Wilson, an analyst for Merrill Lynch. "Juniper had the
only OC 192 router on the market. It's a great story
and Juniper has done a fantastic job."
An OC 192 router sends data through networks at
speeds of 10 Gbits/s. It is the fastest router on the
market for the core part of the network.
The Dell'Oro Group, a research and consulting group in
Redwood City, Calif., released a report showing
Cisco's share of the total market for core routers
slipped from 69 percent in the third quarter of 2000 to
65 percent in the fourth quarter.
The routers tracked are the company's GSR 12000
series sold to service providers.
Meanwhile, Juniper's share of the market for its M160,
M40 and M20 routers rose from 30 percent in the third
quarter to 34 percent in the fourth quarter.
The total market for the fourth quarter was valued at
$836 million, according to Dell'Oro's report.
The third player was Avici Systems, which saw sales of
its Terabit Switch Router grow from a third quarter total
of $4.4 million to $8.8 million in the fourth quarter
2000. The company held one percent market share in
the fourth quarter.
For all of 2000, the core router market was $2.4
billion, according to the Dell'Oro report, Cisco owned
71 percent of the market while Juniper Networks had
28 percent.
But year over year, Cisco's ownership of the market
has slipped also, according to the group. In the last
quarter of 1999, the overall market for core routers
was worth $270.2 million with Cisco owning 78
percent of the market and Juniper just over 17 percent.
While some analysts don't think the fourth quarter
figures signal a continuing slide for Cisco, they do think
the company suffered because it was late to the market
with a router that can jam data through a network at
speeds up to 10 Gbits per second.
In January of this year, Cisco came out with a 10 Gbit
interface card that can slide into a router, making it
capable of fueling an OC 192 pipe.
But Juniper's routers have had the capability since last
spring, a spokesman for the company said.
"It shows that Juniper continues to make inroads into
Cisco's core market and it speaks to the delays that
Cisco has experienced," said David Passmore, research
director with The Burton Group.
As for why Cisco may have been late to market
Passmore said. "It's just tought to develop" an OC 192
router.
And Passmore said in this case Juniper (stock: JNPR)
has the advantage of zeroing in on high-end routers for
the core part of the network whereas Cisco makes
about a dozen different types of routers for different
parts of the network.
"Jupiter is more focused," he said, "Cisco has a lot on
their plate."
He and other analysts expect that now that Cisco has
the OC 192 router technology, there will not be any
more dramatic tradeoffs in market share between Cisco
and Juniper.
"I'd expect Cisco to take its market share back, going
forward; it's just a matter of what rate," said Tom
Lauria of ING Barings. "Most carriers want to diversify
their vendors and don't want to give all their business to
one vendor."
Said Michael Jung, an associate analyst for SG Cowen
Securities: "I think the gains made by Juniper will start
leveling off, because Cisco has the product and can
serve pent up demand in existing customers."
Martina Moscone, a public relations manager for Cisco,
said the company has been disputing the market share
figures with Dell'Oro because they are calculated on
Juniper revenue for sales of equipment and related
services.
Cisco's revenue is based only on equipment sales,
Moscone said.
She said the company believes Cisco's fourth quarter
market share is closer to 69 percent.
She could not say whether their market share fell from
the third quarter but she said there was some softness in
buying because the company's customers were waiting
for the OC 192 line card to come out.
Karolin Di Cristina, a spokeswoman for Dell'Oro, said
that the market share was based on figures provided by
Juniper and Cisco, and Juniper includes service revenue
along with equipment and Cisco doesn't.
But she and analysts said the trend would be the same
even if Cisco's service revenue was taken into account.
"The trend is the same," Wilson said. "Juniper has been
gaining market share from Cisco."
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