Two reports out this week outlining the growth of WLAN gear in homes and offices highlight the paradox we’ve come to expect, created by increased demand for Wi-Fi and a dramatic decline in prices. Shipments of Wi-Fi equipment destined for homes and small offices grew 73 percent since last year, while revenue from the gear failed to keep pace, rising only 21 percent.
The dichotomy is the result of strong sales during the frenzied back-to-school period, accompanied by equally aggressive product rebate campaigns, according to Greg Collins, Senior Director of Wireless LAN Research at Dell’Oro Group.
Collins calls WLAN pricing “cut-throat.”
While the Dell’Oro numbers reflect WLAN shipments, competitor Synergy Research Group produces numbers tracking WLAN sales indicating the same trend.
We are seeing “a paradox,” says Aaron Vance, senior analyst at the Scottsdale, AZ-based firm. “At the low end, it’s a volume business.”
Those inexpensive WLAN devices are increasingly being used to distribute a broadband connection, often from a DSL or cable modem with an integrated WLAN AP, says Collins.
“Approximately 20 percent of broadband subscribers have an external WLAN device, up from 13 percent this time last year,” said Collins.
While only two percent of broadband modems included an AP in 2003, this year, the number has grown to five percent. The drive to include APs is coming mostly from the DSL side, where telcos hope to use them to distribute video throughout the home.
With 4.1 million WLAN devices shipped to the SOHO market, Dell’Oro released rankings for the top companies with products going into homes and small offices. Netgear is ranked third, but saw an impressive 116 percent growth over last year. D-Link was in second place, and Linksys remained number one with 99 percent growth over the previous year.
“Cisco dominates both ends of the market,” says Vance. Cisco , long known for its presence in large enterprises, is now a player in the consumer and SOHO markets with its purchase of Linksys, which owns more than 30 percent of the SOHO space. D-Link is the second most successful vendor, selling into more than 20 percent of the home and small office markets.
Another finding of the reports: WLAN equipment vendors are singing in the key of ‘G’—802.11g is “accounting for nearly three quarters of total shipments,” according to the Dell’Oro report. And that’s not just in homes.
“802.11g has had some traction in the enterprise,” says Vance, but the 54Mbps standard continues to be what’s “driving the low end of the market.”
While 802.11g has become the preferred technology in the SOHO WLAN market, “there’s still a huge installed base of 802.11b out there.”
But as 802.11b falls off the consumer radar, 802.11g will drop in price, and more tech-savvy consumers should expect an “increase in the number of multimode (802.11a mixed with 11b/g) or MIMO-based products on the shelves, according to Collins.
On the enterprise side, Synergy reports that sales were up five percent over the previous quarter — which isn’t a lot. This is the “first quarter when there wasn’t double-digit growth,” says Vance.
Despite the lackluster growth, Collins believes the enterprise sector has finally decided WLANs are a good thing. After suffering growing pains over wireless security and a reluctance to invest, enterprises are now looking at WLANs as a “need-to-have versus nice-to-have” feature, says Vance.
While Cisco leads the enterprise market with 43 percent of sales, for the first time, Airespace broke into the top three, following Symbol , according to Synergy. This is a first for a so-called “wireless switch” vendor.
Vance sees “a shift in the way wireless is being deployed” in the enterprise. Where WLANs were once composed of APs and routers, “now you have products that can be centrally managed with little or no intelligence.” WLAN switches and light APs are expected to reach nearly $63 million in sales this year, according to Synergy. That’s compared to $6 million for light APs and $20 million for WLAN switches last year.
Symbol has 43 percent of the switch and light AP market, while Airespace has 25 percent of the switch market and 45 percent of the light AP market, according to Synergy. Aruba comes in third.
Over all, WLAN equipment sales were up five percent over last year, registering more than $714 million in sales for the quarter.
