CXO

3 Questions: Trends in gigabit switch sales

The latest trends in infrastructure switching


By Carl Weinschenk

With Sam Lucero, industry analyst for networking equipment group,In-Stat/MDR. This has been a good time for the shipment of Ethernet switches. Lucero addressed both the trends in the latter part of 2003 and the complex dynamic going forward.

This interview originally appeared in the IT Business Edge weekly report on Optimizing Infrastructure. To see a complete listing of IT Business Edge weekly reports or to sign up for this free technology intelligence agent, visit www.itbusinessedge.com.

Question: What is the trend in gigabit switch sales?

Lucero: We are seeing NetGear, D-Link, and Linksys shipping a lot of ports that are on Layer 2 unmanaged devices. There is also a push from some more mainstream vendors, such as HP and Enterasys, to put more intelligence at the edge, more Layer 3 in the wiring closet. So it's almost as if the market is bifurcating to some extent. Vendors like HP allow more intelligence and maturation and a lot of Layer 2 ports that are unmanaged, where the emphasis is having cheap devices at the edge.

Question: What is driving sales?

Lucero: Cost, primarily. Large OEMs such as HP, Dell, and IBM are putting gigabit functionality in enterprise PCs. Then you have gigabit-enabled PCs at the desktop that are driving customers to upgrade the switching infrastructure to gigabit as well. That is another trend that started to take off in the second half of 2003. Even 10 Gigabit, which had a very, very small base in 2003, in the fourth quarter saw an extremely sharp increase of 300 percent, with Cisco having a banner quarter.

Question: What do you see as the dynamic going forward?

Lucero: The one negative is that there doesn't seem to be a real strong need for gigabit on the part of the customer. There is no killer app. It is coming down to prices, ASPs [average selling prices] having to drop. Sort of what took place with the shift to fast Ethernet from 10 Megabit. Basically, the enterprise PC OEMs are including gigabit in the product because it has reached price points where it makes sense to go ahead and do so. It's somewhat of a chicken-and-egg dilemma. PCs are once again taking the lead in including gigabit in their product, and that tends to drive adoption of gigabit in the switching infrastructure. ASPs are falling quickly and companies have to evaluate whether they need gigabit right now or if it can be put it off. What we aren't hearing in the surveys and research we do is the opinion that gigabit to desktop has to occur sooner rather than later.

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