More fallout from the downturn has emerged after industry analyst firm Dell'Oro recorded a 11 percent revenue decline for the wireless LAN market during the first quarter, the sector's first ever year-over-year drop.

The biggest impact came from enterprises, many of which were still reeling from last year's economic crash and unable to budget for WLAN purchases, according to Dell'Oro analyst Ben Kwan.

The bright spot was equipment based on the draft IEEE 802.11n standard, the latest and fastest Wi-Fi specification. Revenue from 802.11n gear grew four per cent sequentially from the fourth quarter of last year, and for the first time, 802.11n routers made up a majority of the market. Both enterprises and consumers are embracing 802.11n even though the gear is more expensive, he said.

But results for the overall industry were the worst since the research company began tracking it in 2002. For the first time, wireless LAN unit shipments fell sequentially in all regions of the world, Dell'Oro said. The sequential revenue drop worldwide was more than 15 per cent. The strongest of these areas was Asia-Pacific, where enterprises boosted investment in WLAN gear for schools and public hotspots, according to Kwan.

Cisco Systems, by far the biggest WLAN vendor, lost market share in the enterprise market in the first quarter. It held a 60 per cent share, down from 63.1 per cent in last year's first quarter. Consolidation among vendors has made some of Cisco's competitors stronger, Kwan said. For example, Hewlett-Packard's ProCurve networking business gained on the market leader after acquiring WLAN vendor Colubris Networks last year.

ProCurve grabbed a 3.1 per cent share in the first quarter, up from just 1.7 per cent a year earlier. Aruba grew to an 8.1 per cent share in the quarter, overtaking Motorola as the number-two vendor as that company's share slid to 5.9 per cent.

Despite the bad news, WLANs are selling better than many other networking products, with revenue declining more slowly than for enterprise wired Ethernet switches, Kwan noted. Wi-Fi is even replacing wired LANs in some industries, such as education and health care. With 802.11n, Wi-Fi now has the performance to take the place of wires, though it remains to be seen whether mainstream offices will go this route, he said.

"The wireless LAN market is still very viable, and it really has a lot of future upward potential," Kwan said.