Analysis: Turnaround in networking fortunes?


Analysis: Turnaround in networking fortunes?

Despite networking market declines last year, some technologies hold the promise of growth in 2010, writes GfK's Greg Allen

The past year has been particularly challenging for the networking market, with both the retail and business channels suffering in the recession.

Business channel volumes declined 17.2% in 2009, compared with 2008. The rate of decline was similar in the retail sector. The key networking segments of routers, switches, docking stations and USB hubs all lost volumes.

Combined with this, the year saw price increases as technology changed - router technology has evolved, for example, with 40% of sales coming from N technology routers in 2009 - and the cost of shipping products increased due to fluctuating oil prices.
Moreover, companies attempting to extend the life of existing IT infrastructure during the recession meant the networking market failed to see any growth.
Focusing on the routers segment of the market, it is clear to see that although the segment still represents almost 23% of all networking sales, the fall of G technology routers - 31% lower in 2009 than 2008 - has driven the overall router market down. The falling prices of G and N technology as they become a more effective solution for business and retail consumers means that value has also failed to grow, dropping 3% year on year.
But the outlook for 2010 may not follow the same pattern as 2009 as we look towards a slowing and potential stabilising of the declining market for G technology routers. Moreover, the increasing presence of N technology - growing at 35% in 2009 compared with 2008 - could be the turning point for this segment.
Other segments in the market have also held up well in proportional terms, and more intriguingly we have seen sales of transceivers grow in the business channel, with volumes rising 23% in 2009.
It is reasonable to think that, despite the recession, the need for information and access to internal and external systems has driven businesses to seek greater speed and better quality connections within their networks, and hence why such SFP (small form-factor portable) transceivers have performed well over the past year. It is likely that this trend could continue if we consider the need for storage and networking capacity increases into 2010. It could even pave the way for a not-so-gloomy 2010 in the networking market overall.

Greg Allen is senior account manager for IT at GfK

This was first published in January 2010

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