Equipment vendors are rapidly shuffling positions within the carrier voice-over-IP market--the fastest-growing segment in telecom gear, according to a research note issued today by Merrill Lynch citing data from Synergy Research. While the carrier VoIP market grew 10% sequentially in the third quarter--and 58% from a year earlier--to $410 million, vendors made some surprising shifts in market share, the note said.

While Sonus and Tekelec surrendered some market share in the third quarter, Siemens and Cisco Systems both gained ground by focusing on cable operators, second- and third-tier carriers and hosted VoIP services, Merrill Lynch said. Nortel held on to the market’s top slot but saw its share erode as top-tier carriers focused more on fiber access and DSL buildouts. Nortel claimed just 17% of the market in the third quarter, down sharply from the 29% share it held in last year’s fourth quarter.

Dittberner Associates, measuring the overall VoIP equipment market (a superset of the carrier VoIP equipment market) in terms of ports shipped, recently reported that Nortel lost its leadership position in that market to Huawei Technologies in the third quarter. But heated price competition in the quarter weighed upon revenues.

Though Siemens and Cisco advanced in the third quarter, recent large contract wins--such as Ericsson’s with British Telecom, Alcatel’s with Australia’s Telstra and Lucent Technologies’ with BellSouth, Cingular and SBC--could add further turbulence to this already fast-changing market.

“Vendor market shares are in flux, as Ericsson, Lucent and Alcatel enhance their presence with new contracts,” Merrill Lynch said. “We also note the growing presence of Asian vendors like Huawei, which now controls 6% of the VoIP market.”

Going forward, large vendors may work increasingly with smaller vendors such as Cedar Point, Neura, and General Bandwidth that are successfully addressing niche applications.

“Increasing competition and pressure to cut internal [research and development] costs will motivate larger players like Nortel and Lucent to rely more on technology specialists like…AudioCodes,” Merrill Lynch said.