6/15/2004 -- Things are looking good in the overall networking sector, to be sure, but worldwide VPN and firewall sales are faring especially well, buoyed in no small part by Ciscos strong Q1 2004 performance.

Thats only half the story, however: One prominent researcher says that VPN and firewall revenues will continue to outpace the market in 2004 and beyond.

According to UK researcher Infonetics Research, first quarter worldwide VPN and firewall revenues (for both hardware and software product offerings) were $733 million, up 11 percent from the previous quarter. Infonetics expects the market to grow by 12 percent (to $823 million) by Q1 of 2005.

In this respect, notes principal analyst Jeff Wilson, Cisco led the way, single-handedly driving the overall market to double-digit growth -- even though most vendors tallied uptick in the single-digits.

Several factors have contributed to this growth. Appliances in the middle price-bands [$1,500 to $10,000] and application security gateways drive growth in 2004 and beyond because of large site-to-site and broadband VPN deployments, upgrades of firewalls to the latest technology, and SSL VPN deployments for the next generation of enterprise remote access, Wilson said.

Infonetics says that VPN and firewall appliances account for most worldwide VPN and firewall revenues, while total software revenue and application security gateway revenue currently make up a smaller portion. By 2007, however, Infonetics expects that application security gateways will account for a larger share of the revenue, with small dips in software and appliances revenues.

Infonetics found that Cisco is the worldwide revenue market share leader in both hardware- and software-related VPN and firewall revenues, while firewall specialist Check Point controls the second largest chunk of the worldwide market. Elsewhere, Infonetics says that Juniper Networks, Nokia, Nortel, SonicWALL, Symantec, and WatchGuard are strong second-tier players for revenue market share, even though some of these vendors for example, Juniper, which leads the SSL VPN application security gateway segment have significant market share across a number of different categories. -Stephen Swoyer