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Telecom gear spending to triple, study says

Sales of network equipment to telecom service providers are expected to jump 72 percent this year, but the growth rate will be slower than last year's.

Sales of network equipment to telecommunications service providers are expected to jump 72 percent to $24.4 billion in revenue this year, but the growth rate will be slower than last year's, a new study shows.

Networking companies like Cisco Systems and Nortel Networks should see service provider revenue rise from $14.2 billion in 2000 to $24.4 billion this year, according to the study by market research firm Infonetics Research. The predicted 72 percent growth rate is smaller than the 118 percent increase in 2000.

Networking companies are faced with slower growth in telecommunications spending this year because of the slowing U.S. economy and because emerging carriers, such as DSL (digital subscriber line) service providers, have been struggling financially and won't be able to buy as much equipment as in the past.

Infonetics analyst Kevin Mitchell says the market for service provider equipment is still healthy. The study predicts revenue will more than triple by 2004 to $50.6 billion.

"There are some service providers going out of business, but there are more entering the market," he said. "The tier 1 service providers need to still buy equipment to keep up with customer demands."

The study includes networking hardware at the "core" of the telecommunications carrier network, where most Net traffic travels, and on the "edge," where private businesses connect to the public Internet. The study does not include optical networking equipment.

The study predicted that the market for high-end routers will grow from $2.6 billion in revenue in 2000 to $13.6 billion by 2004.

According to the study, Juniper Networks continues to eat into Cisco's market share in high-end routers--high-speed technology that ships Net traffic. Juniper's market share grew from 26 percent in the 2000 third quarter to 30 percent in the fourth quarter. During that time, Cisco's market share fell from 73 percent to 69 percent, the study shows. Avici Systems captured the remaining 1 percent of the market in the fourth quarter.

Cisco continues to dominate in the market for "edge" routers, capturing 81 percent of the market in the fourth quarter, the study said. Cabletron Systems spinoff Riverstone Networks ranked second with 6 percent. Juniper, which just began shipping edge routers, followed with 4 percent, while Foundry Networks placed fourth with 3 percent market share.