& 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.
From The Founder
Cisco's Conrad Clemson, recently promoted to head up the company's Service Provider Apps & Platforms developments, talks to Light Reading's Founder and CEO Steve Saunders about how he's bringing cloud video, mobile and virtualization together to empower network operators.
Flash Poll
Live Streaming Video
Charting the CSP's Future
Six different communications service providers join to debate their visions of the future CSP, following a landmark presentation from AT&T on its massive virtualization efforts and a look back on where the telecom industry has been and where it's going from two industry veterans.
LRTV Custom TV
CommScope – Meeting the Demands of Tomorrow's Networks

3|24|17   |     |   (0) comments


Phil Sorksy, Vice President International at CommScope, discusses addressing the challenges faced by service providers today, and as future trends emerge.
LRTV Huawei Video Resource Center
AMS-IX & Huawei's OSN 902

3|24|17   |     |   (0) comments


Huawei shows how its OSN 902 platform helps the Amsterdam Internet exchange to connect the world using multiplexing.
LRTV Huawei Video Resource Center
Huawei's Smart Energy Innovation Center

3|24|17   |     |   (0) comments


In Nuremberg, Huawei showcases its latest capabilities in the digitalization of Internet resources, network infrastructure and intelligence at its Smart Energy Innovation Center.
Valley Wonk
OFC & Hyperscale: A Good Mix?

3|24|17   |   01:50   |   (0) comments


Cloud and telecom players want different types of equipment for their networks, as the chatter at OFC reveals.
LRTV Custom TV
Etisalat on NFV Journey

3|24|17   |   10:37   |   (0) comments


Etisalat is a service provider that prides itself on bringing innovative technologies to the markets it serves. It was one of the first operators to implement 3G and leads the pack in fiber penetration. Now, Esmaeel Al Hammadi, Etisalat's SVP of Network Development, explains the operator's journey to virtualization, beginning with the network core, as well as the ...
LRTV Huawei Video Resource Center
Huawei at CeBIT 2017: Day 3

3|22|17   |     |   (0) comments


Light Reading reports from CeBIT 2017 in Germany, where Huawei is exhibiting on the application of technologies and key business verticals such as transportation, smart city, manufacturing, media and finance.
LRTV Documentaries
No Regrets: Cox's Finkelstein on Fiber & More

3|22|17   |     |   (0) comments


At the Cable Next-Gen Technologies & Strategies event in Denver, Cox's Jeff Finkelstein examines the cable capex conundrum.
LRTV Documentaries
Cable Next-Gen: The 'Mile High' View From Denver

3|22|17   |   11:56   |   (0) comments


Alan Breznick kicks off the Cable Next-Gen Technologies & Strategies event in Denver, casting his thousand-yard stare over cable's current competitive landscape.
LRTV Huawei Video Resource Center
Huawei at CeBIT 2017: Day 2

3|21|17   |   2:27   |   (0) comments


Light Reading reports from CeBIT 2017 in Germany, where Huawei is exhibiting digital transformation solutions around IoT, smart data centers, OpenCloud ecosystem and its newly announced storage-as-a-service solution.
LRTV Custom TV
Driving Better Mobile Customer Experience While Transforming the Mobile Network

3|21|17   |   7:47   |   (0) comments


The Citrix NetScaler mobile gateway is an intelligent traffic management solution which can markedly improve the customer experience provided by mobile operators, even when traffic is encrypted. Critical network services can be consolidated and virtualized using NetScaler. Because of the unique architecture, NetScaler can be deployed on any hypervisor, on a ...
LRTV Custom TV
Mastercard: What's Next for Mobile Payments?

3|21|17   |   7:49   |   (0) comments


2017 marks the fifth consecutive year for Mastercard at Mobile World Congress and it was a great time to reflect on the amazing advances the payments industry has made as well as discuss "What's Next' in the digital commerce future. We spoke to James Anderson, executive vice president of digital payments at MasterCard, about digital wallets to tokenization to ...
LRTV Custom TV
Mastercard: 2 Billion Adults 'Trapped' in Cash Economy

3|21|17   |   03:51   |   (1) comment


Despite advances made in the last several years, two billion adults around the world are trapped in a cash economy and lack what we take for granted -- a safe way to receive, save and use money. Shamina Singh, executive vice president of sustainability and president of the Mastercard Center for Inclusive Growth, chats about how Mastercard is developing new ways to ...
Upcoming Live Events
May 15-17, 2017, Austin Convention Center, Austin, TX
May 15, 2017, Austin Convention Center - Austin, TX
June 6, 2017, The Joule Hotel, Dallas, TX
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
High-Band 5G: Let's Address the Range Question, Shall We?
Dan Jones, Mobile Editor, 3/21/2017
Eurobites: A1, Nokia Turn It Up to 11
Paul Rainford, Assistant Editor, Europe, 3/22/2017
FTTH No Slam Dunk for Cable
Carol Wilson, Editor-at-large, 3/23/2017
Top Priorities for B/OSS Transformation
James Crawshaw, Senior Analyst – OSS/BSS Transformation, Heavy Reading, 3/20/2017
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
TEOCO Founder and CEO Atul Jain talks to Light Reading Founder and CEO Steve Saunders about the challenges around cost control and service monetization in the mobile and IoT sectors.
At MWC 2017, Qualcomm's CTO Matt Grob talks to Light Reading's CEO and Founder Steve Saunders about the progress being made in the development of the technologies and standards that will underpin 5G.
Animals with Phones
Neither Do We Click Here
Is that a prerequisite?
Live Digital Audio

Playing it safe can only get you so far. Sometimes the biggest bets have the biggest payouts, and that is true in your career as well. For this radio show, Caroline Chan, general manager of the 5G Infrastructure Division of the Network Platform Group at Intel, will share her own personal story of how she successfully took big bets to build a successful career, as well as offer advice on how you can do the same. We’ll cover everything from how to overcome fear and manage risk, how to be prepared for where technology is going in the future and how to structure your career in a way to ensure you keep progressing. Chan, a seasoned telecom veteran and effective risk taker herself, will also leave plenty of time to answer all your questions live on the air.