According to a recent report by market research firm Infonetics, Cisco (NASDAQ:CSCO) increased its overall carrier router and switch revenue by 3% sequentially in Q3 to $1.43 billion while competitors Alcatel-Lucent (NYSE:ALU), Huawei, Juniper (NYSE:JNPR) and ZTE saw double-digit percent declines. As a result, Cisco’s market share reached over 40% for the first time in 2011. The market, however, was down 7.1% sequentially and increased only 4.5% on a year-over-year basis. 
In the IP edge segment (edge routers and carrier Ethernet switches), which makes up 79% of the carrier router and switch market, Cisco expanded its share to 36.2% in the third quarter.
We currently have a $21.20 Trefis price estimate for Cisco, about 15% above current market price.
Cisco’s Product Refresh and Huawei’s Loss Helped Drive Share
Cisco’s recently refreshed carrier Ethernet switch (CES) portfolio combined with competitor Huawei’s major loss of share (from 17.2% in Q2 to 12.3% in Q3) were cited as main factors behind Cisco’s share gains in the report. Cisco currently leads the CES market with 45% market share globally. Carrier Ethernet switches make up a major portion of the broader carrier Ethernet equipment market which is expected to grow to over $40 billion by 2015, from an estimated $32 billion in 2011. 
This offers tremendous opportunity for Cisco as it continues to maintain lead with its innovative products.
New Competitors a Concern
Avaya, a business communication software provider, recently updated its Ethernet switch portfolio as it seeks to expand into the Ethernet switches market. Though still small, Avaya’s push could undermine Cisco’s dominance in the CES market, as we have seen how Avaya overtook Cisco in the IP telephony market in the first half of 2011. (See Cisco Still Leads Enterprise Voice Equipment Market, But Avaya Catching Up)Notes:
- Cisco storms back in IP Edge market, Huawei posts biggest loss, infonetics.com [↩]
- Infonetics Research ups its Carrier Ethernet equipment forecast to $40.2 billion by 2015, infonetics.com [↩]