LAN in the right marketNext-gen networking equip. mkt seen growing to $29 bln in '04
SAN FRANCISCO, Feb 5 (Reuters) - Lesser-known rivals of Cisco Systems Inc. (NasdaqNM:CSCO - news) are threatening to take over the fast-growing market for next-generation networking switches from the networking infrastructure giant, said a Banc of America Securities analyst on Monday.
Speaking at a Banc of America technology investors conference, BofA analyst Shaw Wu said that companies such as Extreme Networks Inc. (NasdaqNM:EXTR - news) and Foundry Networks Inc. (NasdaqNM:FDRY - news) already lead in the emerging markets for both layer 3 and layer 4-7 switches, which are expected to grow to $14 billion worldwide in 2004 from $2.2 billion in 1999.
``Both offer best of breed products in their space, and are both very well-positioned, Wu said. ''Cisco is not the dominant player in IP (Internet Protocol) anymore."
Including high-speed Internet routers, in which Juniper Networks Inc. (NasdaqNM:JNPR - news) is challenging Cisco for market dominance, the total market for next-generation products will grow to $29 billion in 2004.
Layer 3 switches allow large corporations and telecommunications service providers to transmit data faster and to more different computers on a network than conventional network switches.
Wu predicted that sales of layer 3 switches, along with 10 Gigabit Ethernet switches, would grow to $10 billion in 2004 from $2 billion in 1999. 10 Gigabit Ethernet switches based on an industry-wide standard will become widely available in 2002, he said.
Layer 4-7 switches allow telecommunications and Internet service providers to manage and re-reroute traffic based on their ``content''.
Layer 4-7 switches, despite their enhanced features, are too expensive right now for most service operators, he said. Sales will grow to $4 billion in 2004 from $200 million in 1999, Wu said.
Extreme ended Monday down $1-5/8 to $36-15/16, while Foundry was down $1 to $19. Both stocks are well-off their year highs due to recent slumps in their stock price caused by industry-wide concerns about the slowing economy and lower information technology spending, and present attractive takeover targets, Wu said.