8/10/2004 -- It was a mixed 2003 for the worldwide Ethernet switch market, which simultaneously experienced both the highest of highs double-digit growth and (very nearly) the lowest of lows, in the form of paradoxically declining revenues.

According to market research firm In-Stat/MDR, total worldwide port shipments rose by 16 percent in 2003, from 166.3 million ports shipped in 2002 to 193.0 million in 2003.

So whats to account for the plunging revenues? In this case a drastic reduction in Average Selling Prices (ASP), which caused an 11.8 percent decline in Ethernet switch revenues, from $13 billion in 2002 to $11.4 billion in 2003.

Nevertheless, In-Stat says the sharp uptick in global port shipments wasnt necessarily a fluke. A recovering global economy helped to account for some of the momentum, but the market research firm believes that other factors including a sharp increase in the total number and diversity of LAN endpoints played an important part, as well.

Similarly, In-Stat says, IT organizations are also adding new network services (such as voice and video), which coupled with an emerging convergence of wireless and conventional networks has helped to ratchet up demand.

Elsewhere, In-Stat says that organizations are under pressure to replace aging equipment, especially after nearly three years of comparatively lean IT budgets. The market research specialist adds, however, that budgets are still relatively tight and IT expenditures are still closely scrutinized.

Finally, organizations keep buying capacity because Ethernet switch ASPs continue to drop across all product segments, In-Stat says.

The good news, says In-Stat analyst Sam Lucero, is that these factors and others will help to drive healthy market growth through 2008, at which point total port shipments will amount to 502.8 million.

These trends are causing an underlying technology shift in the Ethernet switch market, with increasing deployments of both L3 Ethernet switches and Gigabit Ethernet switches at the network edge, as LANs become both more intelligent and offer increased bandwidth, he concludes. -Stephen Swoyer