Security Server Market Grows By 22 Percent

The worldwide market for security server appliances grew by 22 percent in the third quarter, and is expected to continue increasing next year, a market research firm said Thursday.Revenue from high-tech systems used to protect corporate networks reached $379.1 million, compared to $311.02 million during the same period last year, International Data Corp. said.

Within the overall market, the intrusion detection appliance segment posted an 89 percent growth rate, but the firewall and virtual private network market remained the largest segment, with $317.7 million in factory revenues in the quarter.

"IDC expects the security appliance market -- particularly the intrusion detection appliance market -- to continue its strong growth in 2004," IDC analyst Charles Kolodgy said in a statement. "A number of new security appliance options have been introduced to the market and this appears to be fueling some of the growth."

The increasing threat of virus attacks on the Internet can't hurt either. Security experts predict spam, for example, will climb next year as a percentage of total e-mail from its current average rate of 50 percent to as much as 75 percent. Many spammers are adopting virus techniques to distribute messages more effectively, increasing their threat to consumers and businesses.

The U.S. in the third quarter accounted for 45.3 percent of the worldwide security-appliance market, despite a slight decline in sales. All other regions, with the exception of Asia/Pacific, posted double-digit, year-over-year growth rates. IDC does not include Japan in the Asia/Pacific region.Among the top five vendors, there was little change. Cisco Systems held on to the No. 1 spot with a 12 percent revenue increase to $133 million. No. 2 Netscreen reported the largest year-over-year growth rate at 91 percent to $57 million.

The remaining top vendors posted slight declines in revenues and market share. Nokia's revenues dipped to $42.5 million from $45.81 million; SonicWALL, $19.9 million from $21.7 million; and WatchGuard, $12.6 million from $14.4 million.

The declines, however, did not necessarily point to trouble for the vendors. "All of the vendors have just introduced new models which, in a time of growing demand, should result in some strong growth over the next few quarters," Kolodgy said.

The three most expensive price bands for appliances had growth rates of more than 100 percent, with the largest price band, $100,000 to $249,900, experiencing a 348 percent increase in the quarter.