12/6/2004 -- As Cisco Systems Inc. goes, so goes the enterprise router market. So when Cisco last month announced disappointing revenues from sales of enterprise routers—one of the networking giant’s bread-and-butter market segments—it shouldn’t have been much of a surprise.

According to market research specialist Infonetics, worldwide enterprise router revenues dropped by 1 percent in the third quarter of 2004, even though worldwide unit shipments increased by 10 percent during the same period.

The worst may not be over, either. Infonetics researchers predict that enterprise router revenues will slip by 4 percent this year, and won’t return to 2003 levels ($3.9 billion) until 2007, making for a five-year compound annual growth rate of—are you sitting down?—negative 1 percent.

The bright spot, if you can call it that, is the performance of Cisco, which is still tops in the core enterprise router market, in spite of the best efforts of its competitors. “Cisco continues to dominate the router world quarter over quarter,” said Infonetics Research’s Matthias Machowinski, in a statement. “The competition is introducing products up and down the enterprise router categories, offering end users more choices and features at aggressive prices. Cisco faces the most competition in the low-end/SOHO categories, pressured by the commoditization of low-end routing and more sales channels.”

For the quarter, Cisco accounted for three-quarters of worldwide enterprise router revenues, and nearly one-fifth of unit sales.

While Infonetics believes standard (i.e., non-secure) router revenues will be anemic for at least the next two years, the researcher projects that secure routers will post slightly higher growth rates over the same period, growing from around 12 percent of the total router market in 2003 to 14 percent in 2007. One upshot of this, Infonetics argues, is that router vendors will increasingly build security features into their routers by default, resulting in the disappearance of the standard enterprise router as we know it.

Elsewhere, volume specialist D-Link was the overall unit leader, with Cisco subsidiary Linksys a close second. Not surprisingly, 48 percent of enterprise router revenues were derived from sales of high-end routers; 39 percent from midrange router sales; and just 3 percent from sales of low-end and SOHO units. Ten percent were attributed to sales of wired broadband gateways.

Globally, 46 percent of all enterprise router revenues were generated in North America; 32 percent in Europe, Middle East and Africa; 17 percent in Asia Pacific; and 5 percent in the Carribbean and Latin America. -Stephen Swoyer