Carrier router, switch spending slowed in Q1 due to 'SDN hesitation,' says Infonetics

Service providers may be interested in adopting software-defined networking (SDN) and network functions virtualization (NFV), but Infonetics says their cautious outlook on these technologies is driving them to be more cautious with spending capital on new routers and switches.

Evidence of this trend was seen in the first quarter of 2014 where the global carrier router and switch market, including IP edge and core routers and carrier Ethernet switches (CES), totaled $3.2 billion, down 13 percent from the fourth quarter of 2013 and up just 2 percent from the first quarter of 2013.

"Last quarter, we identified the 'SDN hesitation,' where we believe the enormity of the coming software-defined networking and network functions virtualization (NFV) transformation is making carriers be more cautious with their spending," said Michael Howard, principal analyst for carrier networks and co-founder of Infonetics Research. "This hesitation reared its head in the first quarter of 2014, where global service provider router and switch revenue increased only 2% from the year-ago quarter."

Howard added that "the current generation of high-capacity edge and core routers can be nursed along for a while as the detailed steps of the SDN-NFV transformation are defined by each service provider--and many of the largest operators in the world are involved, including AT&T (NYSE: T), BT (NYSE: BT), Deutsche Telekom, Telefónica, NTT, China Telecom, and China Mobile."

Across the board, revenue for all product segments, including IP edge and core routers and carrier Ethernet switches (CES), declined by double digits sequentially in the first quarter of 2014.

The same trend took place across all of the geographic regions (NA, EMEA, APAC, CALA), which declined from the previous quarter. However, every region but North America rose year over year.

From a vendor perspective, the top four router and CES vendors maintained their positions, with Cisco in the lead, but Juniper rose to second place, while Alcatel-Lucent (NYSE: ALU) rose to third and Huawei dropped to fourth place.

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