5/31/2005 -- Boom times are back again in the networking biz and just about all product segments are sizzling.

Of course, sizzling demand doesn’t always translate into scorching profits.

Take the enterprise router space, for example. Even though demand for enterprise routers (and particularly for secure routers) remains high, revenues continue to slip. That’s according to networking industry market watcher Infonetics Research, which published its Q1 results last month.

The culprit? Competitive price pressure. In the first quarter of 2005, worldwide enterprise router revenue totaled $750 million—down almost 10 percent from Q4 of 2004—and down 20 percent year-over-year. At the same time, however, worldwide unit shipments increased 4 percent.

The upshot? Vendors are moving more enterprise routers than ever—at lower (enterprise) price points than ever. Infonetics expects this trend to continue through 2008, with unit shipments eventually growing to 1.9 million.

What’s accounting for the uptick in unit shipments? Demand for secure enterprise routers, primarily: From the further quarter of 2004 to Q1 of 2005, demand for secure enterprise routers jumped 19 percent (to 53,000 units), while revenue dipped 3 percent to $96.4 million.

Elsewhere, demand for standard enterprise routers increased by a mere 1 percent, while revenue plummeted by 9 percent to $653 million in Q1. This wasn’t entirely unexpected, of course. In fact, Infonetics notes, unit revenue for standard enterprise routers has been dropping steadily, so players are increasingly focusing on the more lucrative secure router segment.

The hardest hit of all players was also the biggest manufacturer of enterprise routers—Cisco Systems Inc. “The 11 percent revenue-per-unit decrease at Cisco had the most profound effect on the market,” confirmed Matthias Machowinski, directing analyst at Infonetics Research, in a statement.

Nevertheless, Machowinski notes, Cisco remains the worldwide enterprise router market leader (and by a wide margin), in terms of both revenue and unit market share. For the quarter, high-end routers made up 50 percent of worldwide enterprise router revenue, midrange routers made up 47 percent, and low-end/SOHO routers make up 2 percent. Of these, secure routers now account for 13 percent of worldwide revenue—that’s up 1 percent from the previous quarter. -Stephen Swoyer