9/9/2008 -- Judging by the success of Cisco Systems Inc. and other players in the high-end routing segment, you'd think economic happy days were here again.

It certainly looks as if they've got reason to celebrate. According to market-watcher Infonetics Research, service providers are snapping up IP core and edge routers at a voracious clip, boosting manufacturer revenue by 17 percent on a quarter-over-quarter basis -- and by fully 40 percent year-over-year.

Not surprisingly, Cisco had a monster quarter, posting a 15 percent gain in combined IP edge and core revenues, good enough to grab more than half the global market share. That's nothing new for Cisco, of course; it has been the leader in this segment since 2005 despite steadily increasing competition.

Cisco's performance was impressive, but the biggest winner was Fujitsu, which jumped from No. 9 to No. 6 in worldwide IP core and edge routing revenues. Cisco archrivals Juniper and Alcatel-Lucent clocked in at No. 2 and No. 3, respectively, posting "respectable" single-digit revenue gains.

Meanwhile, competitors Huawei, Foundry and NEC had banner quarters, with all three notching double-digit revenue gains. Add it all up and you've got a perscription for gonzo growth in the IP core and edge segment. It's a trend that should last through the rest of the year, at least.

"Since the upturn in 2003 from the great telecom downturn, IP router revenue has grown 20 percent to over 30 percent each year, and we expect the trend to continue in 2008," said Michael Howard, principal analyst and co-founder of Infonetics, in a statement.

What's driving exuberant IP core and edge router growth? Several factors, according to Howard and Infonetics. "The two big drivers for continued growth are expanding traffic and IP transformation projects, with traffic the stronger factor," Howard said. "Of course, spending has to slow or level out at some point, and it will."

Happy days aren't sustainable indefinitely, however.

"Cisco, Juniper, Alcatel-Lucent, Huawei and others hope not, but the overriding damper is that telecom capex growth is slowing," Howard said, citing obvious exceptions in both India and China. "[There are] indications that capital intensity [i.e., the ratio of capital expenditures to revenue] is moving downward, coupled with slow, single-digit revenue growth for many carriers." --Stephen Swoyer