4/6/2010 -- For Cisco Systems Inc., things sure "seem" swell in the Ethernet switching, enterprise routing segment and in the wireless LAN (WLAN) equipment segment.

If the latest market research numbers are any indication, however, Hewlett-Packard's (HP) impending acquisition of 3Com could complicate things.

First up, a recap: sales of Cisco's Ethernet switches surged by almost one-fifth in 2009's final quarter. This helped Cisco retain bragging rights in a market segment that -- once HP completes its acquisition of 3Com -- should get a lot more competitive. After all, while Cisco is tops in Ethernet switching, HP is number two. And 3Com, for what it's worth, is number three.

That's according to market watcher Infonetics Research, which recently ran the numbers on the Ethernet switching segment.

Things look good. All in all, sales of Ethernet switches grew by 15 percent in the final quarter of 2009.

Compare that with 2008's tally when switching revenues dipped by 2 percent between the third and fourth quarters. At the time, industry watchers were actually expecting much worse. (What's more, almost no one expected switching sales to grow by almost 10 percent, year over year.) On a year-over-year basis, fourth quarter sales of Ethernet switches also increased -- albeit by a pedestrian 4 percent.

"The Ethernet switch, enterprise router, and wireless LAN equipment markets have improved significantly from the lows set in the first half of 2009, but are still down overall in 2009 compared to 2008,"said analyst Matthias Machowinski in a statement. "With the economic recovery underway, we expect sales to rise across the board in 2010 and beyond as companies make necessary infrastructure investments and slowly expand again."

Demand for Ethernet switching technology was strong throughout 2009. At the same time, Machowinski points out buyers tended to opt for lower-cost gear, which had the effect of depressing revenue growth relative to volume.

Elsewhere, Infonetics lauded Cisco's performance in the enterprise routing market. In the context of an extremely tough 2009 -- only one of Cisco's routing rivals managed to grow its revenues -- Cisco basically held its own, Machowinski noted. Its unit share decreased by a single point, even as it grew its revenue share by one percentage point.

Cisco will likely face new (and potentially disruptive) competition from the combined HP/3Com. Last year 3Com was the only player to grow its enterprise routing revenues (on both a year-over-year basis and as a percentage of the overall enterprise routing pie), according to Infonetics.

Finally, Cisco was tops in the wireless LAN market, where it generates nearly half (46 percent) of all revenues. Rival Aruba is the number two player in this segment, Infonetics reports. 
--By Stephen Swoyer