thestreet.com on Dell'Oro router/RAC stats. [CSCO/ASND growing RAC share at COMS expense.]
Cisco Adds to Its Router Market Dominance
thestreet.com.
By Kevin Petrie
Staff Reporter
5/29/98 1:37 PM ET
Leading networker Cisco (CSCO:Nasdaq) boosted its
share of the router business in the first quarter, according to the latest market data from
The Dell'Oro Group.
In another market sector, Cisco and rival Ascend
(ASND:Nasdaq) stretched further into 3Com's
(COMS:Nasdaq) "remote access" business of connecting
customers to the Internet. Both markets were smaller
than they were in the fourth quarter, however, which might
reflect more than the typical seasonal swings.
Cisco's stock fell 1 3/16 to 76 1/4 at midday, during an
ugly session for the Nasdaq. Ascend was down 3/8 to 42
15/16 and 3Com lost 5/16 to 26 3/4. Bay Networks
(BAY:NYSE), another networker and a subject of renewed
takeover speculation, traded 1/4 higher at 28 5/8 on heavy
volume.
Analysts Chris Stix and Vijay Rajamani, with Cowen,
published a research note with Dell'Oro's data Friday
morning. While Dell'Oro had given clients such as Cowen
this data late Thursday, it declined to release any figures
to the press until next week. Cowen credited the following
numbers to Dell'Oro:
Cisco grew its share of the high-end router market (often
used by phone carriers or Internet service providers)
slightly to 80.4% from 79.9%, and its share of mid-range
routers to 65.5% from about 63% in the prior quarter. Bay
slipped slightly in each category, to 14.4% and 9.3%,
respectively. Cisco claimed 66.6% of the low-end router
sales tallied by Dell'Oro, while Bay slipped slightly here to
9.6% from 10.3%. Routers are advanced computers that
shuttle data between the networks that make up the
Internet.
Cisco penetrated another market as well. Its share of the
remote access market climbed to 24.1% from about
20.6%. Ascend still leads remote access sales, growing
its share to 30.9% from about 27.2% in the prior quarter.
Both apparently took business from 3Com, whose share
of remote access sales slipped to 28.2% from 34.4%.
ISPs use remote-access concentrators to connect
multiple subscribers to the Internet. Due to fierce
competition, the average selling prices fell 7% from the
prior quarter, according to Cowen.
Overall first-quarter sales of routers and remote access
products did slow some, between 4% and 11%, from the
fourth quarter, but Stix says that reflects the "normal
seasonal patterns." Phone carriers often pause in their
spending early in the calendar year.
Dell'Oro's influential data has limited implications. Dell'Oro
strictly measures a company's initial sales, often to
resellers or distributors rather than to customers. Those
transactions don't necessarily equate to final sales to end
customers. If products are piling up in the channel, user
demand might be lower than Dell'Oro's numbers suggest.
But the upshot is that Cisco keeps selling loads of
routers, despite mounting competition.
Bay Networks is forcing some of that competition. Like
other networkers, it is building so-called layer-three
switches that do the complex work of routers with cut-rate
silicon chips more than with software. Layer-three
switches work speedily, which eases capacity strains on
the Internet. Dell'Oro says last quarter Bay claimed the
largest share of layer-three switches. Cisco's answer to
this threat will also help the company's efforts to maintain
dominance in the router business: Next month Cisco
ships a layer-three model that requires customers to rely
on routers for certain tasks.
Cowen kept its strong buys on Cisco and Ascend, and
buys on Bay and 3Com. The firm has done no
underwriting for any of the four networkers.
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