Server Security Market Continues To Flourish

The worldwide market for security server appliances grew 22% in the third quarter and is expected to continue growing next year, market--research firm IDC said Thursday. Revenue from high-tech systems used to protect company networks reached $379.1 million, compared with $311.02 million during the same period last year, according to IDC.

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

"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 will climb next year as a percentage of total E-mail from its current average rate of 50% to as much as 75%. Many spammers are adopting virus techniques to distribute messages more effectively, increasing their threat to consumers and businesses.

The United States accounted for 45.3% of the worldwide security-appliance market in the quarter, 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% revenue increase to $133 million. No. 2 Netscreen reported the largest year-over-year growth rate at 91% to $57 million. The remaining top vendors posted slight declines in sales and market share. Nokia's revenue dipped to $42.5 million from $45.81 million; SonicWall fell to $19.9 million from $21.7 million; and WatchGuard dropped to $12.6 million from $14.4 million.

However, the declines didn't 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% in the quarter, with the largest price band, $100,000 to $249,900, experiencing a 348% increase.