Global spending on carrier Ethernet gear in the first quarter saw its largest sequential decline in two years, according to Dell'Oro Group. Seamus Crehan, Dell'Oro's senior director of carrier Ethernet switch research, discusses some of the latest trends in the market.

On reasons behind the dip: The market has historically dipped in the first quarter. It's a common pattern; you tend to see stronger buying in the fourth quarter. Two of the major vendors in this market, Cisco Systems and Alcatel, had very strong run-ups in the second half of 2006. Longer term, the market continues to track up nicely.

On 2006 and 2007 growth: Carrier Ethernet revenue grew 35% in 2006--really nice growth. Ports grew a little faster than that, but in that range. This year we'll see nice double-digit growth again, maybe 25%. The market is now starting to become sizable [so growth percentages will begin to fall]. It's handily over $2 billion now.

On routers: In the service provider router market, revenue dipped slightly--in the low single digits sequentially. It grew 10% in the fourth quarter. Within the router market, core [router revenue] dipped more than edge. Edge routing and carrier Ethernet switch spending are related but not necessarily tightly coupled. They're sold together often but not always. You could have carrier Ethernet aggregation deployments and not necessarily at the same time have to buy routers.

On Cisco Systems and Alcatel-Lucent: Those two vendors have almost 70% of the market. Cisco has a broad portfolio of products in this market. Alcatel is the clear number-two vendor. Their flagship product is the 7450 ESS, from their Timetra acquisition. Lucent Technologies has a small presence in this market through their Riverstone acquisition--in the $10-million-a-quarter range. Quite a number of the Riverstone products were pretty old. It remains to be seen if the combined entity will continue to invest in Riverstone. The majority of Alcatel-Lucent's carrier Ethernet switch presence has come from Alcatel, through Timetra. Looking back from Q107 to Q106, Alcatel-Lucent had about 16% of the market. Cisco had a little over half. Cisco's share is pretty similar to a year ago, but Alcatel's share is about four points higher. Riverstone is one of the vendors that have lost share. It's been more dramatic since the acquisition.

On the North American market: North America was pretty flat sequentially [in the first quarter]. Asia/Pacific and [Europe, the Middle East and Africa] were down in the high single digits sequentially. China Telecom had rollouts in the fourth quarter that drove down Asia/Pac [sequential growth in the first quarter]. What kept North America stable was AT&T deploying Alcatel's 7450 as part of the U-verse rollout.