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Report: CMTS sector prime for rosier times

Thu, 05/08/2003 - 8:00pm
Jeff Baumgartner

The cable modem termination system (CMTS) sector took a small revenue hit last year, but it could rebound in the second half of 2003, reports Gartner Dataquest in a new broadband forecast.

Worldwide revenue for cable broadband access platforms, a category that includes the CMTS, dropped 3.8 percent in 2002 to $396.2 million, versus $411.8 million in the previous year. However, stronger demand for high-speed Internet services and other broadband applications could bring on a recovery in the second half of 2003, Dataquest predicts.

For Cisco Systems, the perennial leader in the category, 2002 was marked by good news and not-so-good news. On one hand, Cisco maintained its market lead at the end of 2002, posting $213.1 million in CMTS revenue. On the other, Cisco's market share eroded slightly from 55.6 percent in 2001 to 53.8 percent by the end of 2002.

The drop was in part due to a stout band of competitors. ADC held the No. 2 slot at the end of 2002, with CMTS revenues of $72.9 million and an 18.4 percent share of the worldwide market. That was followed by Motorola Broadband ($43 million/10.9 percent), Terayon Communication Systems ($24.4 million/6.2 percent), Arris ($17.1 million/4.3 percent), Juniper Networks ($8 million, 2 percent) and Com21 Inc. ($7.3 million/1.8 percent). The rest of the sector accounted for $10.4 million in CMTS revenue and a combined share of 2.6 percent.

Despite the slight drop-off in 2002, Gartner Dataquest's CMTS revenue forecast for 2003–2007 is rather bullish. The firm sees revenues jumping to $473 million in 2003, $533.5 million in 2004, and reaching $692.4 million in 2007.

The number of companies fighting for revenues by then could soon grow smaller, as the CMTS sector appears ripe for consolidation, said Patti Reali, principal analyst for Gartner Dataquest.

"I think that certainly we could see some attrition," she said, noting that this would mark the second round of consolidation in the CMTS sector. The first wave saw CMTS specialty start-ups go to the highest bidder.

During that period, ADC bought Broadband Access Systems, Arris snapped up Cadant, Juniper snared Pacific Broadband Communications, and Motorola purchased RiverDelta Networks — all in a bid to add next-generation CMTSs to their respective product lines.

This time, product diversification will play a big role in determining who stays, who gets left behind and who gets gobbled up, Reali said.

By way of example, Reali pointed out that Juniper, despite the fact that it incurs R&D costs associated with its home-grown CMTS silicon, is better equipped than some to weather a sluggish market because its sales strategy is not dependent on one product, but includes a full line of network routers that are sold into sectors than cable.

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