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Cisco's (CSCO) - Get Cisco Systems, Inc. Report resurgence in data networking is starting to put the squeeze on smaller players.

A series of


sales warnings from outfits such as Web switchmaker


( PKTR) and upstart network security shop


( FIRE) signals that competition in the business IT services sector is intensifying.

Analysts and investors say a big part of the blame rides on tech giant Cisco. The San Jose, Calif., networking gearmaker has been swinging its ample girth in such a way that jostled rivals are now steadily losing their footing.

"I talked to an industry executive about this recently," says Ovum IP infrastructure analyst Mark Seery. "He said, 'Everyone has 3% of the enterprise space, but no one has critical mass.'

"You can't make any inroads if you only have 3% market share," adds Seery, "especially against Cisco -- with its strong channel organization."

For the past decade, Cisco has dominated the business networking gear market. At the end of 2006, Cisco had 72% of the Ethernet switch business and 89% of the office router market, according to Dell'Oro Group.

This scale has become an even bigger problem for small players lately, as Cisco pushes its ISR platform further into the market, says Seery, referring to a Cisco interoperability format.

"They have been getting more aggressive. And as they say, no one gets fired for buying Cisco," says Seery.

With Cisco's hand in everything from data storage, voice-over-Internet-protocol gear, network security and video conferencing to the basic data plumbing such as office routers and switches, the complexity level runs a bit high, say industry watchers. On the bright side, if something goes awry, there's one company to call.

"Cisco is like the new

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," says one industry observer who asked not to be identified.

As Cisco exerts its dominance, even the more established gear peers could find sales getting tougher.



(EXTR) - Get Extreme Networks, Inc. Report



( FDRY) and


( COMS) will all continue to feel the heat from Cisco as they try and sustain above-market growth rates," says one New York money manager.

And some of the leading-edge technology shops, along with the strong niche players such as



, could eventually get hammered, says the investor, who currently likes Riverbed.

"Riverbed has done well, and channel checks indicate a decent niche market," says the investor. "But those guys are done long term, as Cisco has them in their cross hairs."