The market for IP services equipment grew 2% sequentially in the fourth quarter of 2005 as it also grew increasingly fragmented, according to research analysis firm Ovum-RHK.

Equipment vendors sold $2.1 billion in IP infrastructure during the fourth quarter, 2% more than in the third quarter and 13% more than in the fourth quarter of 2004. During the whole year, the market grew 12% to $8.1 billion, Ovum-RHK said.

The market’s fourth-quarter growth resulted from sales in North America, where it grew 11%. In Asia, Europe and Latin America, the market shrank 3% to 5%.

Alcatel and Tellabs gained the most market share in the quarter, though Tellabs gained just 1 point. Alcatel’s revenue in the space was up 17% from the year-earlier quarter and up 45% for the full year. Tellabs’ quarterly revenue was up 120% from a small base a year earlier.

Redback Networks and Juniper Networks also grew their IP revenues in the quarter, Ovum-RHK said. Redback’s IP revenue was up 63% from the year-earlier quarter and up 85% for the full year. Juniper’s revenue was up 3% from the year-earlier quarter and up 18% for the full year.

Meanwhile, Cisco lost more than 1% of the market, as its revenue in the space, though up 6% for the full year, was 1% lower in the fourth quarter than it was a year earlier.

“The big story continues to be the continuing fragmentation of the edge market," said Mark Seery, Ovum-RHK’s vice-president of IP Services Infrastructure, in a statement issued today. "Ethernet VPNs, Ethernet-based broadband aggregation, wireless aggregation and frame relay/ATM interworking are creating new opportunities, in addition to the IP VPN and dedicated Internet access applications which Cisco and Juniper have historically dominated."