Network Security Segment Bleeds Out, Cisco Takes Hit
7/7/2009 -- There are few, if any, safe harbors in this economic storm. Recently, the otherwise robust network security segment felt the pinch, recording its lowest revenue performance in more than two years.
That's not-so-great news for Cisco Systems Inc., which -- though it still sits triumphantly athwart the network security market -- continues to cede share to rival Juniper Networks, as well as other competitors.
Market watchers blame cash-strapped IT organizations, which they say are deferring, rather than explicitly canceling, planned network security investments.
"The cuts were due mainly to budgeting delays, a decrease in security spending attached to network infrastructure spending, contraction in overall enterprise spending due to the recession, and slightly cautious carrier spending. By the end of 2009, we expect the network security market to be back at roughly third quarter of 2008 levels. All in all, this was a painful but fairly minor hiccup, not a massive correction," said Jeff Wilson, principal analyst for network security with Infonetics, in a prepared release.
For the quarter, Wilson and Infonetics said, network security hardware (i.e., appliances) and software revenues were off by double-digits, dropping 16 percent. The market will recover, Infonetics stressed, thanks to an expected uptick in spending among SMB customers (instead of enterprise buyers).
"[I]t takes SMBs less time to get budgets in place, and in many cases they still buy security products reactively," Infonetics said.
Cisco is still tops in network security, controlling more than one-third (37.9 percent) of the total market (inclusive of both hardware and software). It lost share in Q1, however, with Juniper, Check Point Software and Fortinet all gaining ground. For the quarter, Infonetics concluded, spending on intrusion detection systems (IDS) and intrusion prevention systems (IPS) was down by 21 percent. That follows on the heels of what Infonetics characterized as "record high" sales in the third and fourth quarters of 2008. --Stephen Swoyer
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