Cisco tops Check Point in firewall sales

Network equipment provider Cisco Systems for the first time has surpassed Check Point Software in an important network security market niche, according to a forthcoming study.

According to the latest market research from International Data Corp., Cisco has pushed Check Point from the top spot in the market for firewall technology, a space it has long dominated. Firewalls are software or hardware devices that businesses use to protect computer networks against unauthorized users or viruses.

In 1998, Cisco captured 23.4 percent of the total revenue in the firewall market, or about $156.5 million. These numbers pushed Check Point to second place, claiming 23 percent, or about $152 million in revenue, according to the IDC report disclosed to CNET News.com by industry sources.

In 1997, Israel-based Check Point led the firewall market with 23 percent market share, or $83.9 million in revenue, while Cisco was second with 21 percent, or $75.7 million in revenue, according to the report.

The IDC report is scheduled for release in the next few weeks.

Cisco executives and IDC analysts could not immediately be reached for comment. Check Point executives confirmed the numbers yet called the entire report in question, saying IDC reported preliminary data.

Check Point's vice president of marketing and development, Asheem Chandna, said the IDC numbers are misleading, and questioned the research firm's methodology. Chandna said the firm counted sales of Cisco's routing hardware that includes firewall technology built in. Because the networking firm makes routing devices that allows businesses and Internet service providers to access the Web, the technology could also be used as a de facto firewall with the addition of certain features.

"From everything we see, when people are serious about firewalls and security, they either buy it as firewall [software] or as an appliance. If they're serious, they don't put [it] on the router," Chandna said.

Chandna added that the study is based on 1998 numbers and believes that Check Point's leadership in firewall market increased in 1999.

Check Point's stock has climbed more than 400 percent from the beginning of the year. Today shares fell $17.75 today to close at $191.38.

Industry analysts said Cisco, which entered the firewall market in 1996, has been adding more security features to its product family to boost its position with corporate customers and to better compete against rival equipment makers Nortel Networks, Lucent Technologies, 3Com and others.

This year, Cisco also cut prices and added new low-end products to put more pressure on its smaller firewall competitors, such as Check Point, Network Associates and Axent.

In some respects, Cisco's rise to the top spot in the firewall market follows a familiar pattern for the networking giant. Using a combination of internal development, company acquisitions and strong marketing to its sprawling installed base of customers, Cisco has slowly climbed in reach of offerings and market share. As a rule, chief executive John Chambers has said the firm aspires eventually to be No. 1 or No. 2 in each new market it enters.

Yet there is some question as to how long a market for separate firewall software technology will exist, according to some industry observers. Larger companies, such as Cisco or Microsoft, are likely in the future to add such a feature to a more wide-ranging product, like operating system software, making it more difficult to charge for the technology.

According to the forthcoming study, the overall market for firewall technology nearly doubled from $365.6 million in 1997 to $669 million in 1998. IDC predicts the market will reach $1.1 billion in 1999, with software makers Microsoft and Novell entering the fray of the top five firewall makers.

The report said in 1998, Network Associates was the third largest firewall technology provider with 9.3 percent of the market, while Secure Computing claimed 5.1 percent and Axent 5 percent in 1998.