3/30/2012 -- For decades now, Cisco has been absolutely dominant in the enterprise routing space.

Today, it still controls roughly three-quarters of the market, according to market watcher Infonetics Research.

But the first few quarters of 2011 spotlighted a worrisome trend: Cisco ceded several points of share to its routing competitors. As the 800 lb. gorilla in the enterprise routing segment, Cisco found itself taking fire from all sides -- particularly from one-time bosom buddy-cum-routing competitor Hewlett-Packard Co. (HP). Increased competition from HP and others has precipitated a brutal price war, with the result that average selling prices (ASP) are plummeting, even as sale volumes have basically recovered.

"The demand for routers is there -- overall volumes are essentially back to pre-recession levels -- but buying patterns have changed and that in turn is hurting revenue, [which is] still down some 18 percent from the pre-recession peak," said Matthias Machowinski, directing analyst for enterprise networks and video at Infonetics Research, in a prepared release. "While the high-end of the market remains robust as buyers invest in congested and mission-critical parts of their network, there is significant substitution in the bulk of the market [i.e., branch and mid-range routing] with lower cost solutions."

Even though Cisco finished 2012 on a high-note -- it outpaced average market growth (1 percent) and achieved a nice "bump" in sales relative to its Q3 numbers -- it's still down by "a couple of points" on the year.

Cisco's poor performance didn't mirror the market, either: for 2011, Infonetics says, sales of enterprise routers were up by about 2 percent from 2010. The upshot, then, is that while Cisco isn't in any imminent danger of being toppled from its perch atop the enterprise routing heap, it isn't exactly an unassailable force.

Cisco's reversal and resurgence in the enterprise routing market parallels, to some extent, its performance in enterprise switching, another segment in which it's accustomed to dominate.

In the final quarter of 2011, for example, Cisco posted a big comeback in enterprise switching sales, boosting its revenues by almost one-fifth and making up some of the ground that it had lost throughout the year.

"Cisco turned things around with a blowout quarter, showing that their internal reorganization and more aggressive stance are starting to pay off," said Machowinski, at the time, noting that Cisco's comeback quarter netted it almost three points of market share.  In that case, Machowinski said, Cisco's gains came at the expense of HP, which was in the midst of a well-publicized reorganization.

In this case, HP seems to have turned the tables: Infonetics says its gains came largely at Cisco's expense.

HP, in fact, was one of the chief beneficiaries of a booming Chinese market, where sales of enterprise routers improved by more than one-third (34 percent) over their year-ago tally.
--By Stephen Swoyer