Dell'Oro: Fast switches, routers roar ahead

Gigabit Ethernet has overtaken Fast Ethernet in new modular-switch ports, commonly used in large enteprises, Dell'Oro Group reported.

Large enterprises are starting to deploy more Gigabit Ethernet than Fast Ethernet to employees' desktops, a generational shift that was about eight years in the making and driven by progressively lower prices, according to market research company Dell'Oro Group.

Those faster enterprise networks are coming at the same time as carriers are snapping up a new generation of high-end routers as they bounce back from the post-Internet bubble doldrums, the market research company said.

In the fourth quarter of last year, more 1G bps Ethernet ports than Fast Ethernet ports were purchased for modular Ethernet LAN switches, Dell'Oro reported last week.

Modular switches, which have a chassis that can be filled with a variety of port modules, are commonly used by large enterprises for Ethernet connections to individual employees' PCs. There were about 3.4 million Gigabit Ethernet modular-switch ports sold in the quarter, versus about 3.1 million Fast Ethernet ports, according to Dell'Oro.

Gigabit Ethernet emerged in 1997 as a high-speed technology for enterprise LAN backbones and server connections using optical fiber. In 1999 it became available for standard copper Ethernet cables, and the price of a Gigabit Ethernet port has fallen from about US$1,700 in the early days to an average of US$280 in modular switches today, according to Dell'Oro analyst Seamus Crehan. Fast Ethernet ports for modular switches average about US$140, he said. Many new business desktop and notebook PCs are available with Gigabit Ethernet interfaces.

In most cases, it's not current bandwidth needs driving Gigabit Ethernet to the desktop, Crehan said. Rather, large enterprises are buying the faster ports to future-proof their networks. A new switch typically should last four years, and it's worth the extra cost to make sure users will have the speed they need then, he said.

"There are very few desktop applications (today) requiring greater than the current default connection speed, which is Fast Ethernet," Crehan said.

In fixed-configuration switches, the kind most often used by small and medium-sized organizations, Fast Ethernet still dominates in terms of ports shipped, he added.

Meanwhile, the next generation of LAN backbone technology, 10-Gigabit Ethernet, is rising fast in large enterprises. The number of 10-Gigabit ports sold has been growing about 70 percent every quarter, Crehan said, though they still make up only a tiny percentage of the total ports sold.

Cisco Systems dominated the overall switch market with about 71.5 percent of the market in the fourth quarter. Nortel Networks, its closest rival, had a 5 percent share, Crehan said. Over the past several quarters, Cisco generally has been gaining share, he said.

The LAN switch market had one of its strongest years ever in 2004, with revenue up 22 percent from the previous year, but it will ease off that breakneck pace in 2005, with growth of about 8 percent, Dell'Oro predicts.

Meanwhile, the market for high-end routers grew strongly for both the fourth quarter and the full year 2004, Dell'Oro analyst Shin Umeda said. Worldwide in the fourth quarter, vendors sold US$384 million worth of routers that can support 10G bps interfaces, he said. That's up 11 percent from the previous quarter and 77 percent from the fourth quarter of 2003. Sales for the full year were 66 percent ahead of 2003, Umeda said. The rebound has been going on for about 18 months now.

"The carriers out there have really returned to investing in that infrastructure, ... driven mainly by the growth of broadband subscribers," Umeda said. Consumers have been snapping up broadband rapidly in just about every part of the world, he added.

That's taking up the excess router capacity that was left after overly aggressive buildouts during the bubble, and service providers are now deploying new routers that let them pack more high-speed ports into a chassis and run more packets through the router, Umeda said.

That phenomenal rebound is giving way to merely strong growth, Umeda said. Dell'Oro predicts 2005 sales will grow 27 percent from last year's figure.

Cisco had 55 percent of the high-end router market in the fourth quarter, but Juniper Networks has been gaining on the networking giant. Juniper had a market share of almost 40 percent in the quarter. It's still too early to gauge the impact of major new core router products that the two companies introduced last year, Umeda said. Cisco announced its CRS-1 platform in May and Juniper delivered its TX Matrix router interconnect platform in December.

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