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Networking firms' boom time over

According to a new study, the market for networking equipment is predicted to grow a mere 8.1 percent to $29.1 billion for 1998.

These are the times that try networking companies' souls.

According to a new study by market researcher In-Stat, the market for networking equipment is predicted to grow a mere 8.1 percent to $29.1 billion for 1998, a far cry from the boom times of recent years.

The study's results could be bad news for data players such as Bay Networks, Cabletron Systems, and 3Com, which all continue attempts to recover from poor financial performance in recent fiscal quarters.

The only firm that has been relatively immune to the down shift in the networking industry is the largest manufacturer of devices for data networks, Cisco Systems. Ascend Communications has also returned to health after a tumultuous period, due in part to a rocky merger with Cascade Communications.

A variety of economic, customer, and technological factors have converged to challenge the 30 to 50 percent growth rates networking companies have been used to in the past, as previously reported.

According to the study, the main culprit for the slowdown is the increased commoditization of the Ethernet-based switching market, which represents 21 percent of the overall market, according to In-Stat.

The router market, the second largest opportunity for networkers, is expected to grow 11 percent in 1998, to $5.4 billion, according to the study, driven largely by the introduction of next-generation routing devices that incorporate high-speed switching capabilities within the same box.

Other highlights of the study include opportunities for equipment providers as telecommunications firms move from circuit-based switches to a packet-based topology on their networks to support voice, video, and data. Large players in this segment will include Cisco, Lucent Technologies, and Northern Telecom, as well as a slew of start-ups.

The networking card, shared hub, frame relay-based switching devices, and remote access server segments will all experience negative growth rates for 1998, according to In-Stat.