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Mobile Data Traffic Drove Revenue in Cisco’s NGN Routing Segment

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NGN Routing segment’s revenue rose 5% YoY

The revenue from Cisco’s (CSCO) NGN (Next Generation) Routing segment rose 5% in fiscal 2Q16 to $1.85 billion. The NGN Routing segment accounts for 15.6% of the firm’s total revenue. The routing business reported an 8% YoY decline in revenue in fiscal 1Q16 after posting 3% YoY growth in fiscal 4Q15. The decline in fiscal 1Q16 was a result of negative growth due to changes in telecom service providers’ spending plans.

An increase in the penetration of mobile devices such as smartphones and tablets will drive the demand for mobile data. Telecom companies might look to upgrade networks to support and monetize traffic growth. Escalating mobile data traffic will have a positive impact on router sales.

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Competition in the Core Router segment

Historically, Cisco Systems and Juniper Networks controlled the Core Router segment. The companies had a combined market share in excess of 80%. The scenario changed with the re-entry of Alcatel-Lucent (ALU) in this segment in 2012.

Currently, Alcatel-Lucent’s market share in edge routing grew to 24%. The company edged out Juniper Networks to become the number-two vendor in this segment in 2010, despite entering the market in 2003. Alcatel-Lucent can use this platform as leverage to increase its market share in the Core Router segment as well. Alcatel-Lucent was acquired by Europe’s (EFA) Nokia (NOK) in 2015.

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