Cisco’s Router Business Continues to Show Slow Growth



Cisco’s Routing business is showing slow growth

Cisco (CSCO) calls its router business Next Generation Network (or NGN) Routing. This business continues to show slow growth, and it grew by a year-over-year rate of 2% in fiscal 2Q15. The situation is even worse when we analyze the business’s growth in the previous quarters. As the chart below shows, before the last quarter, Cisco’s routing business’s year-over-year revenue growth was in negative territory.

During the latest earnings call, Cisco’s management mentioned that its new router products—such as CRS-X and NCS—showed strong growth in an otherwise weak router market.

Article continues below advertisement

Alcatel-Lucent is gaining share at Cisco’s expense

The overall router market is indeed struggling to grow. According to a report from Dell’Oro Group, the service provider core router market declined by a year-over-year rate of 8%, while the service provider edge router market was flat as of calendar 3Q14. The report also mentioned that Cisco, Alcatel-Lucent (ALU), Juniper (JNPR), and Huawei were the top four players in the service provider router market, with a combined market share of 94% as of calendar 3Q14. However, except for Alcatel-Lucent, all these players recorded negative year-over-year growth rates.

Alcatel-Lucent’s 7950 XRS core router has started to become popular. In October last year, CenturyLink (CTL), one of the largest telecom companies in the US, agreed to deploy Alcatel-Lucent’s 7950 XRS core router to support its growing broadband needs. In the previous part of the series, we also discussed how Alcatel-Lucent gained contracts with China’s (FXI) major telecom providers. Alcatel-Lucent’s growing market share certainly threatens Cisco.


More From Market Realist