Security appliance market growth continues to slow in Q3 2012

USA: According to the International Data Corp. (IDC) Worldwide Quarterly Security Appliance Tracker, both factory revenue and unit shipments grew in the third quarter of 2012 (3Q12) compared to the previous year.

Worldwide factory revenue was up 5.7 percent year over year to just over $2 billion, as shipments increased 1 percent to 499,022 units. In the previous quarter, factory revenue growth was 6.6 percent and unit growth was 5.8 percent compared to the second quarter of 2011.

Geographically, revenue grew fastest in Asia/Pacific (excluding Japan) with a 13.3 percent year-over-year increase. Western Europe continued to see sluggish growth, increasing just 0.5 percent year over year.

Japan had the highest unit growth year over year of 8.3 percent, followed closely by combined Central and Eastern Europe and Middle East, and Africa at 7.9 percent. The United States recorded 4.6 percent revenue growth on a unit decrease of 1.2 percent vs.3Q11, indicating some softness in lower price bands and that revenue growth was driven by larger enterprises and service providers.

"Overall, macroeconomic conditions have been questionable at best. While the security market remains more resilient than others, there was a definite slow-down in growth rates in the third quarter," said John Grady, research manager, Security Products at IDC. "That being said, the evolving threat landscape continues to drive spending on security products as organizations battle to keep their infrastructures secure and their data protected."

The combined shares of the top five global vendors represented 48.5% of the market in 3Q12. Cisco continues to lead the overall security appliance market with 16.2 percent share in factory revenue for the third quarter, but this was down from 17.3 percent in the prior year period.

Check Point held the number two spot with 12.8 percent share for the quarter as revenue increased 12.8 percent compared to the third quarter of 2011. Fortinet saw the largest growth among the top five vendors at 17.2 percent. The share of Others increased primarily due to strong quarters from Palo Alto Networks and Sourcefire.

At the functional market level, the Unified Threat Management (UTM) segment saw the largest year-over-year revenue growth at 24.3 percent and accounted for 33.3 percent of security appliance revenues in 3Q12, as multi-function appliances continue to drive growth in the overall market.

The firewall/VPN market represented 26.7 percent of the security appliance revenues thanks to 7.3 percent year-over-year growth due primarily to Cisco and Juniper. The IPS and VPN segments were the only markets to show revenue declines compared to 3Q11.

"The shift in network security for continuous security processes in detecting threats that other solutions miss is leading the move for unified security management for protection against advanced threats, modern malware, and data theft," said Ebenezer Obeng-Nyarkoh, senior research analyst, Worldwide Trackers Group.