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Carrier Ethernet Market Off to Good Start in 2010

Heavy Reading's latest research indicates the global market for Carrier Ethernet service edge routers, Carrier Ethernet switch/routers (CESR), and Carrier Ethernet access platforms (CEAPs) grew at a strong double-digit rate year-over-year to surpass $1.66 billion in the first quarter of 2010. The overall Carrier Ethernet market held up nicely on a sequential basis as well during this period, following a strong performance at the end of 2009.

The Carrier Ethernet market is growing at a good clip despite the sluggish global economy because Ethernet offers compelling value compared to legacy technology alternatives and because operators are deploying Carrier Ethernet/MPLS infrastructure to support many of their most critical and fastest-growing business, residential, and mobile services. While Ethernet business services and consumer triple-play/VoD/IPTV services have been driving most sales over the past several years, ramping deployments related to mobile backhaul infrastructure are providing an additional revenue stream for many vendors and helping shield them from the worst effects of the uncertain macroeconomic environment.

Worldwide sales of CESR equipment grew 14 percent year-over-year to $492 million in the first quarter of 2010, according to Heavy Reading's new Carrier Ethernet Switch/Router Quarterly Market Tracker. North America performed particularly well compared to other regions. Cisco Systems Inc. (Nasdaq: CSCO), Brocade Communications Systems Inc. (Nasdaq: BRCD), Extreme Networks Inc. (Nasdaq: EXTR), and Ciena Corp. (NYSE: CIEN) all grew sales at a double-digit rate from the fourth quarter of 2009 to the first quarter of 2010.

Cisco maintained its CESR lead and regained multiple share points in the first quarter of 2010. No. 2 Alcatel-Lucent (NYSE: ALU), No. 3 Huawei Technologies Co. Ltd. , and No. 4 ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) lost some ground following strong sales at the end of 2009, but their market-share percentages were virtually unchanged on a rolling four-quarter basis. No. 5 Brocade and No. 6 Extreme each gained a share point between the fourth quarter of 2009 and the first quarter of 2010.

Our latest Carrier Ethernet Access Platform Quarterly Market Tracker indicates that the CEAP market grew 60 percent year-over-year and 11 percent quarter-over-quarter to $355 million in the first quarter 2010. Of the three key segments we examine in the CEAP Tracker, the Ethernet-over-fiber demarcation platform/access switch segment grew most rapidly, followed by Ethernet-over-bonded copper pair access platforms, then by Ethernet-over-TDM access circuit platforms.

Ciena blew the top off its Ethernet-over-fiber access sales in its most recent fiscal quarter ending in April 2010, and this strong performance catapulted the vendor to the No. 1 share position (20 percent) of the Ethernet-over-fiber access segment in the first calendar quarter. Ciena’s sales were fueled by wireless backhaul and business services applications. Other top Ethernet-over-fiber access platform suppliers for the first quarter of 2010 include No. 2 Cisco, No. 3 Huawei, and No. 4 ADVA Optical Networking .

All three Ethernet-over-bonded copper pair platform market leaders – No. 1 Hatteras Networks Inc. , No. 2 Adtran Inc. (Nasdaq: ADTN), and No. 3 Actelis Networks Inc. – recorded sequential growth in the first quarter of 2010, and all three have made comments pointing to another strong showing in the second quarter. We estimate Hatteras has led this segment each quarter for the past several years, due primarily to solid sales in the US and Europe, but Adtran has leveraged the popularity of the TA 5000 multiservice access platform to challenge Hatteras’s lead, and Actelis has regained some market share in recent quarters.

Fast-growing Overture Networks Inc. maintained its dominance of the Ethernet-over-TDM access circuit platform market in the first quarter of 2010. ANDA Networks Inc. and RAD Data Communications Ltd. tied for the No. 2 share position in the same period, but ANDA appeared to hold a small edge over RAD on a rolling four-quarter basis. Hatteras rose to the No. 5 slot in the Ethernet-over-TDM access circuit platform market after launching its HN6100 multiservice platform last year.

Dozens of Carrier Ethernet network infrastructure and access solutions providers will be participating alongside their service provider customers in Light Reading’s Ethernet Expo 2010 in New York City on November 2 & 3. If you haven’t done so already, register now for the Ethernet networking event of the year!

— Stan Hubbard, Senior Analyst, Heavy Reading

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