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.
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.