Switching Market In A Permanent Swoon


With Cisco Systems set to report earnings on Wednesday afternoon, it seems timely to report this downbeat view of the switching market.

Dell’Oro reported Tuesday morning that the Ethernet switching market, which Cisco dominates, should tumble 20 percent this year – its sharpest drop since 2001.

“Given the severity of the decline during the first quarter of 2009, it will be difficult for the market to rebound quickly to the revenue and port levels we saw in 2008,” said Alan Weckel, director of Ethernet switch market research.

Evidently Weckel expects some market improvement during the second half of the year. That may give some lift to revenue at Cisco. And he also predicts the market will begin expanding again in 2010, with purchases for busy corporate data centers and interest in new high-speed 10 gigabit Ethernet switches leading the way.

“However, it will be difficult for the market to return to the robust growth rates it enjoyed over the past five years,” says Weckel. (Some of those growth rates weren’t so robust, as a matter of fact.)

It will be interesting to see what Cisco says about the future of this key networking market. Permanent slowing would be an ominous sign for the company. However, it is clear corporate networks will need to expand dramatically in coming years as video is more routinely incorporated in reports and on Web sites.

There are reasons to think a wave of new buying could be on the way several years from now.