Does Cisco Own More Then 40% of the IP Phone Market?
Source: smithonvoip.com
The Dell’Oro Group, a market information group, released a report yesterday that has Cisco selling well over 1 Million IP Phones in the second quarter of 2006. The report all shows the total IP Phone market growing by 42% from Q2 of 2005, to over $500 Million.
What I found interesting about these numbers was the fact that an average Cisco IP Phone retails for $565 to $265 depending on the model and if they sold over 1 Million IP Phones in Q2 of 2006 simple math shows Cisco owning 100% of the market space. I know this is not true, so I decided to do a little more math, using a few assumptions, to get a better idea of just how much of the IP Phone market Cisco owns.
Given that the bulk of Cisco’s sales are driven through their two-tier reseller channel I would guess that their “sell” cost is probably at 40% of MSRP after value incentive rebates, etc to there distribution partners. Here is how that breaks out:
- Assumption 1: Cisco Gives Distribution Partners 60% Off MSRP
- Assumption 2: Average MSRP of a Cisco IP Phone is $415 (Using Range of $565 - $265)
- Assumption 3: Average Cost to Distribution of a Cisco IP Phone $166 (Average X. 40)
- Assumption 4: Sales Revenue From Cisco Handsets For Quarter 2 $199,200,00 ($162 X 1.2M)
- Total Market Share: 40% (Actually 39.84, but rounded numbers are better)
Now all of this was done using assumptions based on my knowledge of the Cisco channel. There is room for error - both ways - on this, but for a company that owns 70 to 80% (by revenue) of the Networking market I would think that these numbers are low, especially in an emerging technology sector like Voice Over IP. A sector that is supposed to be a “growth area” for Cisco I would expect to out perform it’s mainstay business. Does this mean that those within the VoIP market (buyers, service providers, resellers, etc.) are not willing to pay the “Cisco Premium?” Does Cisco’s closed system limit their market reach and therefore their potential?
What do you think? Are those within the VoIP industry and those that are considering migrating to VoIP, not willing to pay for the Cisco Premium? Does anyone have any other data on the total handset sales of other IP Phone manufacturers?
