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Nortel Drags Down Market

Light Reading
News Analysis
Light Reading
5/24/2001

The bigger they are, the harder they fall: That principle's illustrated in the latest optical transport market figures from The Dell'Oro Group.

The report indicates that the sinking fortunes of Nortel Networks Corp. (NYSE/Toronto: NT) have resulted in a 52 percent reduction in revenues for the company -- which in turn has slashed overall market growth by 22 percent.

Optical Transport Market Revenue Growth, 1Q01 "Nortel has a very large share of the optical transport market, and the optical shortfall last quarter can be attributed to Nortel's decline," says Shin Umeda, author of the report.

While Nortel founders, however, others have gained: Lucent Technologies Inc. (NYSE: LU), for instance, shows revenue growth of 29 percent, according to the report.

But that figure merely reflects Lucent's inevitable rise from an all-time low, Umeda says. "They're still far below where they were a year ago. Lucent reached its lowest point in the fourth quarter of 2000, so anything now is an improvement," he says.

Meanwhile, healthy revenue growth from Ciena Corp. (Nasdaq: CIEN) and Marconi Communications PLC (Nasdaq/London: MONI) aren't sufficient to tip the market scales just yet, since both those companies hold less than 10 percent of the overall market, according to Dell'Oro.

Still, Ciena's growth indicates strength in high-channel-count DWDM systems, while Marconi highlights ongoing strength in the European market, Umeda says.

Overall, Nortel is still top dog in the optical transport market, owning 29 percent of revenues in long-haul and metro DWDM gear, as well as Sonet/SDH multiplexers.

But sliding sales, which Nortel attributes to the slowdown in carrier spending, have ripped its share nearly in half: For the fourth quarter 2000, Nortel enjoyed close to a 52 percent composite market share, according to Dell'Oro (see Nortel: Top Dog, but for How Long?).

Optical Transport Market Shares, Q101 Nortel has a simple response to all this: "Wait and see." A spokesperson for the vendor says the company's "not surprised" by the quarterly report, given the overall economic downturn in carrier spending. But the company's confident that new products, such as the OPTera Connect HDX, will renew growth and stabilize the firm's market position (see Nortel's Got a Plan).

- Mary Jander, Senior Editor, Light Reading
http://www.lightreading.com

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Techeyes
Techeyes
12/4/2012 | 8:22:44 PM
re: Nortel Drags Down Market
I find it hard to believe that Lucent increased 29% in revenue considering Lucent's current state. Where were the numbers derived from? Lucent as a whole or only their optical division?
LightCycle
LightCycle
12/4/2012 | 8:22:43 PM
re: Nortel Drags Down Market
Indeed.

I believe Lucent's growth comes at the expense of margins - Lucent's Optical team has low-balling opportunties over the last year or more.
Physical_Layer
Physical_Layer
12/4/2012 | 8:22:43 PM
re: Nortel Drags Down Market
Does anyone else notice that the "other" slice of the pie represents 33% of the market? This is really significant in my mind...usually this slice is low single digits.

BTW - to the LightReading staff - I would really like to see a piece done on DWDM vs SONET. I find that all these reports (Dell'Oro, RHK, etc) talk about DWDM market share and SONET market share but the distinction is not made clear at all. For example, say somebody takes Nortel S/DMS Transportnode OC-192 gear and uses a 32-channel mux/demux and amplification system along with it. What does that count as? SONET or DWDM? There is a lot of confusion in this area to me. Besides this ... the whole concept of "open interfaces" is probably something worthy of description. Just because I can hook anybody's equipment up to my OPTera Long Haul 1600, does this mean it's "open"? Do you need OPTera gear at the other end to interpret the data? If so I would not call that open.

Anyway - just something that is still bugging me.
muley
muley
12/4/2012 | 8:22:42 PM
re: Nortel Drags Down Market
The Nortel OC-192 tx/rx Transponder based signals hit passive couplers within the shelf at a specific ITU grid wavelength transmitted from the 192 card (This is called integrated DWDM). After the multiple OC-192 and OC-48 signals are coupled in the coupler it is a DWDM signal then this signal is amplified and sent down the line.

The Open Architecture DWDM simply means the Transponders are based in a seperate DWDM box instead of coming from the tx signal on the SONET ADM side. The transponders on the DWDM box will allow any vendor/signal to hit it and then it's converted to the specific ITU grid wavelength spacing it needs to couple and send down the line
equinox
equinox
12/4/2012 | 8:22:41 PM
re: Nortel Drags Down Market
Physical Layer -

I agreee with you. What do you consider OPTera Connecct DX into OPTera LH 1600? The DWDM grid optics are itegrated into the DX's OC192 optics. How do you differentiate then between the SONET and DWDM layer? I can understand if someone was say using the DX for OC192 ADM functionality with 1550 optics into say a Cienna DWDM layer, that would be a more cut and dry case with the DX being SONET and Cienna being DWDM.

I will say this concerning open interfaces. Nortel got many complaints with their old TransportNode OC192 product since the same bay could hold the MOR/MOR+ Amps, couplers and ADM equipment. Unless you were using NTs OC192s or OC48s you weren't getting into their optical layer, at least not with their support. The OPTera LH product split the ADM and DWDM layer and introducted wavelength translators that allowed you to translate "someone elses" optical services into their (NTs) DWDM wavelengths hence "open interfaces" into their optical layer.

I tell you, integrated solutions just really mess up research groups!
puddnhead_wilson
puddnhead_wilson
12/4/2012 | 8:22:38 PM
re: Nortel Drags Down Market
Indeed. It would be helpful if the author would provided at least some breakdown of this "Other" slice. In particular, it would be nice to be able to put into context the share gains of Marconi & Ciena, since they are so prominently mentioned earlier in the piece.
Milano
Milano
12/4/2012 | 8:22:37 PM
re: Nortel Drags Down Market
Well, well, so Lucent is in the #2 spot, nice growth on top of that, I'm waiting for congratulations! You mean, LU is still doing something right? Hey, the Corvis and Sycamore bunch that use this board as a proxy for having coffee together, you're welcome back!! C'mon, it's better than the McDonald on Elizabeth Drive!

Milano
quanta
quanta
12/4/2012 | 8:22:36 PM
re: Nortel Drags Down Market
LuxN is not!!!

In the three months since I have been looking at this site I have seen nothing but lofty praise and PR for this company. Now they are laying off.

What gives????
puddnhead_wilson
puddnhead_wilson
12/4/2012 | 8:22:35 PM
re: Nortel Drags Down Market
>I believe Lucent's growth comes at the expense of margins - Lucent's Optical team has low-balling opportunties over the last year or more.

This would jive with Gary Smith's comments in the latest CIENA conference call on margin pressures in future quarters due to "desperation pricing tactics" by competitors ... although I took it at the time as a reference mainly to NT (and this report only reinforces that impression).
johnjohn
johnjohn
12/4/2012 | 8:22:31 PM
re: Nortel Drags Down Market
Metro DWDM market rose 16% in Q1

1) NT
2) ONIS
3) CIEN
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