The market for worldwide shipments of consumer cable modems fell 17 percent to $270 million in the second quarter compared with the previous quarter, according to a study released Thursday by the Dell'Oro Group. Motorola retained the top spot once again with $91.8 million, but slipped 3 percent. Terayon finished second with $40.5 million in modem revenue, an increase of 38 percent. The market decline follows an 11 percent drop in the first quarter revenue to $324 million.
Industry analyst Paul Baranello says the causes of the falling revenue originated in the first half of last year when a shortage of components also caused a modem shortage and kept prices high. Cable-service providers bought as many modems as possible, and modem makers produced as much as possible. The shortage eventually dissipated and demand from providers fell in the second half of last year leaving modem makers with an oversupply of modems, which were difficult to sell since providers had stockpiled equipment. Makers were then forced to shave down their inventory by cutting prices. On the bright side, Baranello points out that while market revenue has fallen, unit shipments have stayed unchanged for the past two quarters after dropping at the end of last year and that the market is showing signs of getting back to more manageable inventory levels.