TIA

For Immediate Release
June 29 , 2006

CTI fastest-growing component of enterprise equipment market in 2005 reaching $5.7 billion

Arlington, Va. -- The U.S. enterprise equipment market strengthened in the 2004 and 2005 period, expanding 14 percent, compared with only 5 percent growth in previous years (2000-03), according to TIA's 2006 Telecommunications Market Review and Forecast. Total revenue from spending on enterprise equipment reached $98.3 billion in 2005, an increase of 6.9 percent over 2004, and is expected to climb to $104.5 billion in 2006. Computer-telephony integration (CTI) was the fastest-growing component of the enterprise market in 2005, with a 10.5 percent increase to $5.7 billion, followed by videoconferencing equipment, which rose 10 percent, reaching $825 million.

The enterprise equipment market consists of private branch exchanges (PBXs), key telephone systems (KTSs), voice processing equipment, internetworking equipment, videoconferencing equipment, and CTI systems and software. Enterprise equipment revenue was hampered by the weak economic climate in 2001-03 and by Y2K concerns in the late 1990s, which caused companies to replace equipment more quickly than they might have otherwise. In 2000-03, equipment was relatively new, lessening the demand to replace or upgrade. By 2004, however, equipment purchased in 1998- 1999 was beginning to age, leases were expiring, the economy had improved and enterprises were once again looking to upgrade their existing infrastructure. Purchases picked up in 2004-05, concentrating on IP and convergent systems and internetworking equipment to support those systems. As legacy equipment ages, replacement demand, along with rapid growth in videoconferencing and unified communications, will continue to fuel spending. Total revenue from spending on enterprise equipment is expected to reach $121.7 billion by 2009, growing at a 5.5 percent compound annual growth rate (CAGR).

PBX revenue increased 20 percent in 2004-05 to $4.1 billion on the strength of accelerating IP/converged sales. The KTS market, which plunged 42 percent over the 2000-03 period, rebounded 7 percent. Buoyed by new products and the need to replace aging equipment, voice processing equipment also rebounded in 2004-05 following three years of decline, increasing 6.5 percent in 2005, totaling $5.3 billion. Internetworking equipment increased 6.7 percent in 2005 to $81.1 billion, its largest gain in five years; internetworking equipment will expand at a 5.7 percent CAGR from 2006-09, fueled by advances in Gigabit Ethernet.

IP/converged systems will continue to fuel PBX sales over the next few years. By 2009, however, as the installed base becomes predominantly IP, most equipment will be relatively new, and the replacement demand for PBXs will drop. TIA predicts revenue growth in this area will fall to 1.1 percent in 2009 following three years of mid-to-high single-digit gains. For the 2006-09 period, growth will average 5.2 percent compounded annually. That growth will come at the expense of the KTS/hybrid market, which will decrease at a 13.7 percent CAGR as current users upgrade to IP-PBXs.

TIA's 2006 Telecommunications Market Review and Forecast provides an overview of telecom's interrelated market segments including landline network, enterprise and consumer, wireless communications, and international markets. It's available in hard copy or on CD-ROM. To order, please visit http://www.tiaonline.org/business/research/mrf/ or call +1 (703) 907-7074. To obtain a press copy of the report, please contact Jennifer Mead at +1 (703) 907-7723 or email jmead@tiaonline.org.

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About TIA
The Telecommunications Industry Association is the leading trade association for the information and communications technology (ICT) industry. As owner and producer of GLOBALCOMM™, TIA serves ICT suppliers to global markets through its leadership in standards development, domestic and international policy advocacy, and facilitating member business opportunities. TIA represents the communications sector of the Electronic Industries Alliance (EIA). Visit us at http://www.tiaonline.org. GLOBALCOMM™ is a trademark of the Telecommunications Industry Association (TIA). The Next-Generation Communications Marketplace and Summit will take place June 18-21, 2007, at McCormick Place in Chicago, Illinois, USA. Visit www.globalcomm2007.com.

P.A. Release: 06-59/06.29.06