Networking Growth Prospects... NN in best sector
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Wednesday June 10, 12:59 pm Eastern Time
Company Press Release
In-Stat Forecasts Networking Market To Grow Only 8.1%
in 1998
SCOTTSDALE, Az.--(BUSINESS WIRE)--June 10, 1998--Today In-Stat announced the slowest
growth rate to date for the networking industry to its Wall Street clients during its Quarterly Networking
Industry Conference Call. Based on results of the Q1 1998 Networking market, In-Stat has revised its
growth expectation to 8.1%, anticipating the networking equipment industry to grow to $29.1 billion in
1998, up from $26.9 billion in 1997.
While some segments of the networking industry are growing at a faster rate, the overall market is
slowing. The biggest culprit is free falling prices for Enterprise Ethernet Switches. This networking
segment is the largest segment of the industry, representing 21% of the total market opportunity in 1998,
and any negative effects felt in that segment ripple through the entire industry.
''As commodity dynamics embrace large portions of the networking market, we will continue to see the
same dynamics unfold as seen in the PC and semiconductor industry,'' said Jeremy Duke, Group
Director of Networking for Cahners In-Stat Group. ''While unit demand remains at all time highs,
rapidly declining Average Selling Prices (ASPs) for Local Area Network (LAN) equipment is
significantly reducing sales growth.'' For example, even though growth in port shipments for Ethernet
and Fast Ethernet Switching remain in the triple digits, dollar growth is only expected to hit 20% in 1998,
significantly down from the prior forecasted growth rate of 46% for this market segment.
The second largest component of the networking industry is the router market. In-Stat expects the
router market to grow 11 % in 1998 to $5.4 billion. ''1998 will be an outstanding year of growth for this
segment as next generation routers are brought to market,'' explained Duke. ''Enterprise Layer 3 Switch
Routers had a significant first quarter in Q1 1998 and the In-Stat anticipates fast market adoption of this
new breed of networking gear as more products and players enter this market.''
In-Stat believes the second boost to the router market will take place towards the second half of this
year via the wider availability of Carrier Class SONET Based Routers. In-Stat also believes that as
Service Providers seek to increase performance and scalability of Internet Backbones, significant capital
investment will be made in this new class of IP switching engines. In addition, as circuit-based
infrastructures migrate to packet-based architectures, these new routers will provide the fundamental
building blocks of Packet over SONET . Such capital expenditures will provide significant growth for the
overall networking industry well into the next century. In-Stat anticipates Cisco, Lucent, and Nortel to be
the main contenders for this market segment over the next 12 to 18 months. Further, they anticipate
new, aggressive start-ups to bring their gigabit and terabit switch routers to market in 1998.
The four market segments expected to experience negative revenue growth in 1998 include (in order of
their significance to the overall market) Network Interface Cards (NICs), Shared Media Hubs, Frame
Relay Switches, and Access Servers.
The markets with the strongest growth rates in 1998 include ATM Enterprise Switches and ATM Wide
Area Network (WAN) Equipment. Dollar growth for ATM in the LAN will be driven by the success of
OC-12 in Enterprise LAN Backbones. Success for ATM in the WAN continues to be driven by the
Frame Relay market. Also, Layer 3 Switch Routers will grow to $687 Million in 1998, up from nothing in
1997.
North America remains the largest opportunity for the Networking Industry holding 50.7% of the market
in Q1 1998. Given that a growing percent of capital expenditures are comprised of IT investments,
In-Stat anticipates the US networking equipment market to trend with the overall US economy, Duke
explained. Europe has come back stronger for the last three quarters, mirroring their positive economic
activity. In Q1 1998, Europe represented 28.6 % of the networking industry. The strongest economies
driving total growth in that region include Great Britain and Germany.
Japan and Southeast Asia will pose the most challenges for the networking industry in 1998. ''In-Stat
measures this region's share of the networking pie to be 13.9 %. Japan is looking at a recession for the
year and Southeast Asia continues to battle with its currency crisis, creating a hostile climate for overall
business activity in that region,'' explained Duke. However, strong GDP growth in China, Taiwan, and
Singapore will be the bright spots in the Asia Pacific region. Networking companies that have developed
relationships and a strong presence in those regions stand to significantly benefit from the capital
investments being made in those regional communications infrastructures.
To find out more about Cahners In-Stat Group's demand-side, supply-side, or quarterly market share and
forecasting market research services please contact Dennis Ashton at 602-483-4471. or email
dennisa@instat.com.
In-Stat is a full service, high-technology, market research and information company serving the
semiconductor, communications, computer, and multimedia marketplaces. In-Stat's sister company, BRG
is a demand-side technology market research and consulting organization providing strategic planning
information and consulting services. In-Stat and BRG are part of Cahners-In-Stat Group, which is a
division of Cahners Business Information, the largest publisher of specialized business publications in the
United States. Visit In-Stat Online at instat.com and BRG at www.brgresearch.com. |
