Worldwide Security Appliance Market Makes Continued Gains with 22% Revenue Growth in Third Quarter, IDC Says

FRAMINGHAM, MA – DECEMBER 18, 2003 – The worldwide security server appliance market reached $379.1 million in revenues for the third quarter of 2003, representing a strong 22% growth rate when compared to the third quarter of 2002, according to IDC’s Worldwide Quarterly Security Appliance Server Tracker. Within the overall market, the intrusion detection appliance segment nearly doubled year-over-year, posting an 89% growth rate. Meanwhile, the firewall/virtual private network (VPN) appliance market remained the largest segment, ending 3Q03 with $317.7 million in factory revenues.

"IDC expects the security appliance market – particularly the intrusion detection appliance market – to continue its strong growth in 2004. A number of new security appliance options have been introduced to the market and this appears to be fuelling some of the growth," says Charles Kolodgy, research director for IDC's Security Products service.

When compared to 3Q02, the United States and Asia/Pacific (excluding Japan) declined slightly as a portion of worldwide sales as all other regions (Western Europe, Japan, and rest of world (ROW)) increased their market shares. The United States continues to lead the market, however, accounting for 45.3% of total worldwide revenues. All regions, with the exception of Asia/Pacific (excluding Japan), experienced double-digit year-over-year growth rates in 3Q03.

There was little change among the top 5 security appliance vendor rankings with Cisco continuing to hold the number 1 position with $133 million in revenues, a 12% increase from 3Q02. Netscreen retained the number 2 position with $57 million in revenues and experienced the largest year-over-year growth among the top 5 vendors at 91%. Nokia, SonicWALL, and WatchGuard completed the top 5 with all three vendors experiencing slight declines in year-over-year growth and market share.

"The major vendors in this market generally had flat quarters or declined year-over-year, but the numbers do not tell the whole story,” added Kolodgy. “All of the vendors have just introduced new models which, in a time of growing demand, should result is some strong growth over the next few quarters."

IDC also reports that the three most expensive price bands ($25K-$49.9K, $50K-$99.9K, and $100K-$249.9K) all had year-over-year growth rates of more than 100% with the largest growth in the $100K-$249.9K price band, which experienced a 348% increase in 3Q03.

Top 5 Vendor, Worldwide Security Appliance Factory Revenue, Third Quarter of 2003

(Revenues are in Millions)

Vendor 3Q 2003 Revenue 3Q 2003 Market Share 3Q 2002 Revenue 3Q 2002 Market Share Revenue Growth 3Q02/3Q03

Cisco $133.20 35% $119.31 38% 12%

Netscreen $57.41 15% $30.05 10% 91%

Nokia $42.52 11% $45.81 15% -7%

SonicWALL $19.87 5% $21.72 7% -9%

WatchGuard $12.64 3% $14.38 5% -12%

Others $113.49 30% $79.75 26% 42%

All Vendors $379.12 100% $311.02 100% 22%

*Numbers may not be exact due to rounding.

Source: IDC, December 2003

IDC's Worldwide Quarterly Security Appliance Server Tracker is a quantitative tool for analyzing the global security server appliance server market on a quarterly basis. The Tracker includes quarterly shipments (both ISS and upgrades) and revenues (both customer and factory), segmented by vendor, sub-market, family, model, region, operating system, price band, CPU type, and architecture.

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