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Why Did HPE’s Share in the Ethernet Switch Segment Fall?

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Cisco has a market share of 56.8% in its Ethernet Switching segment

According to IDC (International Data Corporation), Cisco’s (CSCO) revenues fell 2.6% YoY (year-over-year) in its Ethernet Switching segment in 2Q16. Its market share also fell from 59% in 2Q15 to 56.8% in 2Q16. The worldwide Ethernet switch market grew 3% YoY to $6.0 billion at the end of 2Q16.

Other major players in this market include Hewlett Packard Enterprise (HPE) and China’s (FXI) Huawei. HPE’s Ethernet switch revenues fell 34.8% YoY in 2Q16, and the company had a market share of 6% compared to over 9% in 2Q15. Huawei’s revenues rose substantially by 44% YoY in 2Q16, whereas Juniper’s (JNPR) revenues fell 4.3% YoY in the switching business. The worldwide Ethernet switch market rose 1.4% YoY to $5.5 billion in 1Q16.

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HPE split from H3C

According to a report from StreetInsider, HPE announced the close of a transaction with an affiliate of the China-based (FXI) Tsinghua Holdings “to create New H3C Group, the leading Chinese provider of technology infrastructure” earlier this year.

As per the agreement, Unisplendour, the affiliate, purchased a 51% stake in New H3C for $2.3 billion. This deal includes H3C Technologies as well as HPE’s server, technology, and storage services businesses in China. HPE had stated that it will return cash to shareholders through share repurchases.

The new H3C has a market share of 3.6% in the Ethernet switch market. “Combining the strengths of HPE and Tsinghua, one of China’s most respected institutions, New H3C will build upon an extensive and valuable patent portfolio, best-in-class products and customer focus, and Tsinghua’s world-class research capability,” said Meg Whitman, president and CEO of Hewlett Packard Enterprise.

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