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Who Are the Market Leaders in the Routing Segment?

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Aug. 16 2016, Updated 11:04 a.m. ET

Cisco leads the Routing business with a share of 48.8%

According to IDC, Cisco’s (CSCO) revenues fell by 2.4% YoY (year-over-year) in the Service Provider & Enterprise Router segment in 1Q16. Its market share in 1Q16 was 48.8%. The worldwide Enterprise and Service Provider market grew by 3.3% YoY to ~$3.5 billion at the end of 1Q16.

China-based Huawei’s Enterprise and SP revenues rose 34.1% YoY in 1Q16. It now accounts for 16.3% of the total router market.

In 1Q16, Juniper’s (JNPR) combined SP and enterprise router revenues rose 2.7% YoY. The company now has a share of 14.5% in this segment.

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What are the key drivers for this business?

An increase in the penetration of mobile devices such as smartphones and tablets will drive the demand for mobile data. Telecom firms will then focus on upgrading their networks in order to support and monetize mobile traffic growth. Escalating mobile traffic will positively impact router sales.

As the graph shows, mobile data traffic in the Middle East and Africa is projected to grow at a CAGR (compound annual growth rate) of 72% by 2019. Central and Eastern Europe is expected to grow at a CAGR of 71%, whereas Asia-Pacific could grow at a CAGR of 58% by 2019.

In comparison, mobile data traffic in Latin America, North America, and Western Europe is expected to grow at a CAGR of 59%, 47%, and 48%, respectively.

How did Cisco’s Routing business perform in fiscal 3Q16?

Cisco’s routing business saw revenues fall 5% YoY in fiscal 3Q16. Revenues in this segment fell from $2 billion in fiscal 3Q15 to $1.9 billion in fiscal 3Q16. This 5% decline was driven by the weakness in high-end routing products.

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