Looming Fiscal Cliff and Europe Uncertainties Continues to

Looming Fiscal Cliff and Europe Uncertainties Continues to Undercut
Router Market Growth; Q3 Service Provider Routing & Switching Market
Share Report, ACG Research 
In Addition to Economic Uncertainty, Vendors in the Router and
Switching Market Are Dealing With More Intensive Competition,
Diminishing Service Provider's Profit Margins, and Their Largest
Customers Cutting Spending and Delaying Purchases of New Equipment 
PHOENIX, AZ -- (Marketwire) -- 11/26/12 --  Against a backdrop of
global economic instability and political unrest, the Worldwide
Carrier Routing & Switching markets reflected typical cyclical
performance, remaining slightly flat in Q3. ACG Research anticipates
global economic uncertainty, a challenging market and aggressive
competition will continue to put pressure on vendors' pricing and
margins. "Enterprise CEOs will, most likely, remain conservative and
more focused in their IT spending and hiring for the remainder of the
year," states Ray Mota, managing partner. "These factors will
continue to force vendors to innovate and develop technology that can
deliver significant operational savings as well as address market
demands for new and cutting-edge services that are application
focused. Despite some vendors providing low guidance for Q4, AT&T
announced a CapEx increase of $2.5 billion per year."  
Q3 Total Worldwide Carrier Routing & Switching market posted revenue
of $2.75B. The global market decreased 1.7% q/q and 2.5% y/y. Core
Routing revenues were down 1.9% q/q and 9.6% y/y. Edge Routing and
Switching revenues were down 1.7% q/q and down 0.4% y/y.  
Cisco posted a total worldwide decline of 0.3% q/q and a decrease of
0.8% y/y. In spite of the decrease Cisco reports that its CRS and ASR
series continue to demonstrate strong traction. Alcatel-Lucent
decreased 2.16% q/q but was solidly up 8.2% y/y. ALU's 100 Gig is a
big differentiator for the company, and the company continues to see
more sales traction with this port for core solutions, edge and
metro. Juniper increased worldwide routing revenue 1.2%, q/q but was
down 7.7% y/y. The company cited the reduction in service providers
purchasing high-end networking equipment, difficulty penetrating new
markets with new products and strong competition from Cisco as
factors influencing its quarterly results.  

                 Vendor       Q-Q MS Point +/-  Y-Y MS Point +/- 
           Cisco                    +0.8              +1.0       
           Alcatel-Lucent           -0.1              +1.8       
           Juniper                  +0.5              -1.0       
           Tellabs                  -0.1              -0.4       
           Huawei                   -0.2              -0.2       

In the US the threat of the "fiscal cliff" is creating a tremendous
uncertainty and service providers are monitoring it closely in order
to get some visibility on what kind of impact it will have on
consumer, small, mid and enterprise business spending. The threat of
another recession could potentially extend service providers'
build-out of new services that, in turn, could impact their CapEx
spending. ACG plans to monitor this closely in 2013 with our service
provider capacity index service, which tracks the rate of change in
capacity and how "hot" SPs are running their networks. 

--  Core network traffic is growing in excess of 50% per year and new
    services such as content-rich digital media, cloud and mobile placing
    new requirements on the network.
--  Competitive factors such as lower pricing and reduced margins are
    putting pressure on the routing segment.
--  Interest in mobility and cloud computing continues to grow, especially
    with SPs that recognize that to have a cost-effective, scalable,
    automated data center that enables them to offer new services/products
    they need technology that can deliver significant operational
--  In a recent ACG survey, 78% of respondents reported that they have SDN
    plans that were either under discussion or were planned deployment.
    Interest in SDN has increased in momentum for two primary reasons: 1)
    a less than positive macroeconomic environment and 2) providers are
    searching for a new way to deliver new services and realize
    significant operational savings while increasing service velocity.

ACG Research delivers telecom market share/forecast reports, consulting
services, business case analysis, product and service message
testing. ACG provides you with accurate market share data, strategic
and tactical advice, services and products, and timely answers to
industry questions so that you can better understand market dynamics
and grow your telecom operations more efficiently and profitably.
Copyright Copyright 2012 ACG Research 
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