Cahners In-Stat Group Announces 2Q 01 Networking Quarterlies Results.

Business Editors & High-Tech Writers

SCOTTSDALE, Ariz.--(BUSINESS WIRE)--Aug. 21, 2001

Cahners In-Stat Group (http://www.instat.com) today announced the results of its Networking Quarterlies reports for the second quarter of 2001 (2Q 01).

The quarterlies, which cover broadband modems, terabit routers, multiservice WAN switches, high-end LAN switches, packet telephony gateways, and network interface cards (NICs), reported the following for the quarter:

-- Total analog modem shipments decreased, while digital modems increased.
Although total analog modems fell, retail internal modems increased slightly
from 1Q 01. ADSL and cable modems increased by 17% and 1% respectively in units
shipped. 3Com exited the cable modem market and caused ASPs to fall by 28%.
Modem + LAN PC cards continued to fall along with PC card shipments. Despite
the increase in 1Q 01, bundled internal modem shipments decreased by 30% in 2Q
01. Digital modem shipments are expected to grow over the next three quarters.

-- Once again the total router market experienced a 9% decrease from 1Q 01 and
a 16% decrease from 2Q 00 to $2.5 billion, primarily due to the decline in ASPs
in most of the segments. Despite the decline in revenue, unit shipments grew 6%
largely due to the increase in the SOHO, branch office and mid-range segments.
High-end and terabit products saw a decline of 13% and 14% respectively, due to
service providers' and carriers' lack of spending in the slowing economy.

-- This was a tough quarter for multiservice WAN switch sales, as service
providers and enterprises significantly reduced their spending, with the
slowdown in the economy. Total worldwide multiservice WAN switch manufacturer
sales revenues were $1 billion, a decrease of 28% from 1Q 01, where sales had
still remained quite strong. Service providers economized on capital spending,
by using existing equipment as much as possible, and adding more,
higher-density cards to this equipment to handle traffic growth.

-- The Layer 2/3/4-7 switch market shrank 9% as ports shipped dropped to 31.53
million, from 34.83 million in 1Q 01. Revenues shrank 15% to $3.62 billion.
Ports and revenues were driven by Gigabit Ethernet, Layer 3 and modular
switches in general. In particular, L2 and L4-7 fixed Gigabit Ethernet
switches, and all types of copper Gigabit Ethernet switches outperformed the
overall market for the quarter. This pattern highlights the continuing
importance of the enterprise market and the way it is dealing with the economic
slowdown -- delaying more desktop "future-proofing" purchases in favor of
critical backbone upgrades. It also shows the importance of cost-effective, yet
high-bandwidth solutions such as Gigabit Ethernet over copper, which is the
only segment to continue to show growth throughout the market slowdown.
Overall, moderate switch growth is expected to resume in the second half of
2001. Fast Ethernet and L3 products will drive unit shipments and L3/4-7 and
Gigabit Ethernet will drive revenue growth.

-- Total packet telephony gateway revenue totaled $243.2 million, representing
a 10% decline vs. the previous quarter. Total packet telephony gateway port
shipments in 3Q 01 is expected to be about the same as it was in 2Q 01. This
networking market segment is doing much better than some other segments in the
current tough environment. As a means to reduce cost and expand services,
packet telephony gateways are expected to do very well when the current
industry slump abates.

-- The NIC market continued its slide, as lower PC shipments and continued
integration of networking connectivity on the PC motherboard reduced overall
demand for NICs. The market dropped 11% sequentially to 10.9 million units
shipped, the fourth straight quarter with declines in excess of 8%. The lone
bright spot for the NIC market is the continued growth of the Gigabit Ethernet
over copper market, which grew 30% sequentially.

In-Stat's Networking Quarterlies Service provides quarterly market shares and forecast information, covering all major networking product groups (high-end LAN switches and appliances -- including 10 Gigabit Ethernet; routers -- including terabit routers; multi-service WAN switches -- ATM/Frame Relay; packet telephony gateways; broadband modems; NICs and quarterly market reviews).

To purchase any of these reports, or for more information, visit http://www.instat.com/catalog/cat-cq.htm or contact Courtney McEuen at 916/984-1179; [e-mail]. The reports are priced at $2,995 USD.

Cahners In-Stat Group (http://www.instat.com/) covers the full spectrum of digital communications research from vendor to end-user, providing the analysis and perspective that allows technology vendors and service providers worldwide to make more informed business decisions.

In-Stat is a unit of Cahners Business Information (www.cahners.com), a leading provider of critical information and marketing solutions to business professionals and a member of the Reed Elsevier plc group.