Sales of core routers to service providers have shrunk a little this year but will bounce back strongly next year, according to statistics released earlier this week by Synergy Research Group Inc., a market research company (see Router Market Grows in Q3.)

Synergy says third quarter service provider sales of core routers totalled $333 million, the second consecutive increase after several quarters of decline -- with this year representing a 1.7 percent reduction compared with last year. It forecasts that next year's overall sales will total $1.5 billion, a 19.4 percent increase over 2003.

The market for edge routers is bigger than for core routers and is growing more strongly, according to Synergy. It's heading for growth of 6.8 percent this year, which will result in fourth quarter sales of $489 million. Sales will rise 35.5 percent next year, to an annual total of $2.2 billion.

{Image 1} Broadband aggregation routers, a sub-segment of edge, show the most dramatic increase this year, rising 122.4 percent to $143 million in the fourth quarter, with a more modest rise of 30.3 percent next year to $649 million.

IP services routers represent the smallest, but fastest growing segment; up 4.4 percent this year and increasing 41 percent in the third quarter to £34.5 million. Growth in this segment is lumpy, with sales expected to rise 32.4 percent next year to a total of $146 million, falling 17.9 percent in the fourth quarter.

Following a drop in the third quarter of this year, the average selling price of high-end routers is set to rise steadily in early 2004, with a slight dip at the end of the year. In the long term, Synergy forecasts that the arrival of 40 Gbit/s transmission speeds will drive up the price and keep the money rolling into the market.

— Nicole Willing, Light Reading