& cplSiteName &

Optical Vendors Optimistic Despite Shrinking Market

Dan O'Shea
8/26/2014
50%
50%

The optical market is shrinking. So, why have several optical transport vendors sounded fairly optimistic about the future in recent months? The answer lies in what could be the fastest-growing market segment for many of them: web content giants.

Infinera Corp. (Nasdaq: INFN), Ciena Corp. (NYSE: CIEN), BTI Systems Inc. , Cyan Inc. and MRV Communications Inc. (Nasdaq: MRVC), among others, all have made hopeful, if somewhat vague, allusions during their earnings calls and interviews to the increasing frequency with which they are seeing their systems adopted by web content companies. (See Infinera Reports Q2 and Ciena Soars on Strong Demand.)

That shouldn't come as much of a surprise, considering how much traffic between data centers is growing, and the degree to which Google, Amazon, Facebook, Microsoft and other web firms continue to invest in building data centers. These companies aren't new customers in many cases either, having previously invested in 10G links and now looking to upgrade to 100G to cover their traffic growth.

However, the fact that these companies are looking outside the data center to invest in connectivity is a bit of a godsend to optical transport vendors more used to being captive to the wavering demand, capex whims and long sales cycle of the major telcos.

"The overall optics business is not growing right now; in fact, it's shrinking," says Heavy Reading senior analyst Sterling Perrin. "This part of the market [web content firms] is still small today, but it is growing much faster than the overall optics market." (Perrin will be working on a Heavy Reading report on this very topic in the months to come.)


Want to know more about what's going on in data center connectivity and infrastructure? Check out our dedicated data center content channel here on Light Reading.


Yet, as a market opportunity, the sector of web content companies is as mysterious as it is tantalizing. None of the optical vendors mentioned above has identified their web content customers, and to an even greater degree than the most secretive telcos, the web guys seem to have little interest in talking publicly about their optical investments or with whom they're spending their money. (See Is Google Fueling BTI's Growth?)

Also, though a fast-growing market opportunity, it is still considered more of a market sub-segment across the optical supplier realm, part of the broader enterprise market segment, which itself plays second fiddle to the service provider market for most vendors. No vendors appear ready to break out the percentage of their revenue coming from the web content sector, and the size of contracts and breadth of the deployments in many cases isn't clear.

For now, the deals with web content companies are a nice side story for some of the optical vendors, but it's still not as impressive as winning a national contract with a major telco. Also, until more is known about the web giants' spending plans and patterns, it will be unclear if their interest in optical transport represents a more fundamental market shift.

However, if the trend continues, things could get interesting. The content companies already have well established relationships with vendors supplying infrastructure and connectivity inside their data centers, including Cisco, Brocade, Dell and others. Perrin notes that the content sector's growing interest in connectivity outside the data center eventually could inspire those vendors to pursue acquisitions in the optical transport arena.

— Dan O'Shea, Managing Editor, Light Reading

(1)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
mendyk
0%
100%
mendyk,
User Rank: Light Sabre
8/26/2014 | 8:57:05 AM
Off center
Dan -- Doesn't the move to distributed data centers -- including the repurposing of central offices to function as local DCs -- translate into some new business for optical suppliers?
More Blogs from DOS Attack
Ciena and ADVA separately show off the ability for their new data center interconnect gear to address a variety of distance needs.
The utility industry is keeping TDM alive, but maybe not for much longer.
Vendor CEOs make a lot of money, but we have a list of those who made more than most.
Growing security threats are set to drive critical infrastructure operators to new investment and upgrades of their internal networks.
Mike Birck guided Tellabs for more than 30 years over a span of five decades.
Featured Video
From The Founder
Light Reading is spending much of this year digging into the details of how automation technology will impact the comms market, but let's take a moment to also look at how automation is set to overturn the current world order by the middle of the century.
Flash Poll
Upcoming Live Events
November 1, 2017, The Royal Garden Hotel
November 1, 2017, The Montcalm Marble Arch
November 2, 2017, 8 Northumberland Avenue, London, UK
November 2, 2017, 8 Northumberland Avenue – London
November 10, 2017, The Westin Times Square, New York, NY
November 16, 2017, ExCel Centre, London
November 30, 2017, The Westin Times Square
May 14-17, 2018, Austin Convention Center
All Upcoming Live Events
Infographics
With the mobile ecosystem becoming increasingly vulnerable to security threats, AdaptiveMobile has laid out some of the key considerations for the wireless community.
Hot Topics
Muni Policies Stymie Edge Computing
Carol Wilson, Editor-at-large, 10/17/2017
Is US Lurching Back to Monopoly Status?
Carol Wilson, Editor-at-large, 10/16/2017
'Brutal' Automation & the Looming Workforce Cull
Iain Morris, News Editor, 10/18/2017
Pai's FCC Raises Alarms at Competitive Carriers
Carol Wilson, Editor-at-large, 10/16/2017
Worried About Bandwidth for 4K? Here Comes 8K!
Aditya Kishore, Practice Leader, Video Transformation, Telco Transformation, 10/17/2017
Animals with Phones
Selfie Game Strong Click Here
Latest Comment
Live Digital Audio

Understanding the full experience of women in technology requires starting at the collegiate level (or sooner) and studying the technologies women are involved with, company cultures they're part of and personal experiences of individuals.

During this WiC radio show, we will talk with Nicole Engelbert, the director of Research & Analysis for Ovum Technology and a 23-year telecom industry veteran, about her experiences and perspectives on women in tech. Engelbert covers infrastructure, applications and industries for Ovum, but she is also involved in the research firm's higher education team and has helped colleges and universities globally leverage technology as a strategy for improving recruitment, retention and graduation performance.

She will share her unique insight into the collegiate level, where women pursuing engineering and STEM-related degrees is dwindling. Engelbert will also reveal new, original Ovum research on the topics of artificial intelligence, the Internet of Things, security and augmented reality, as well as discuss what each of those technologies might mean for women in our field. As always, we'll also leave plenty of time to answer all your questions live on the air and chat board.

Like Us on Facebook
Twitter Feed
Partner Perspectives - content from our sponsors
The Mobile Broadband Road Ahead
By Kevin Taylor, for Huawei
All Partner Perspectives