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Optical Switch Market Stirs

Light Reading
News Analysis
Light Reading
4/23/2003

Two top equipment vendors had some optical switch announcements this week, and, while neither was a barnburner, they show there's still a heartbeat in the sector. And the heartbeat may even get stronger as this year wears on.

On Monday, Lucent Technologies Inc. (NYSE: LU) announced that it will begin supplying its LambdaUnite MultiService Switch to Shandong Unicom, a subsidiary of China Unicom Ltd. (see Lucent Builds Out Shandong Unicom).

On Tuesday, Sycamore Networks Inc. (Nasdaq: SCMR) announced that its switch is the industry's first to incorporate both the Generalized Multiprotocol Label Switching (MPLS) protocol and the Optical Internetworking Forum (OIF)'s User-to-Network Interface (UNI) 1.0 requirement (see Sycamore Supports GMPLS, OIF).

Lucent won't give any details about its customer win. The peanut gallery views the win as interesting, though unlikely to give Ciena Corp.'s (Nasdaq: CIEN) CoreDirector the heebie-jeebies.

"Shandong is already a Lucent customer for CDMA products," writes David Gross, an analyst at Communications Industry Researchers Inc. (CIR). "This gives [Lucent] a sales advantage over the other switch makers, but this is still just a provincial contract. I wouldn't classify it as a 'big' win unless it included the entire Unicom region, or at least other large provinces such as Guangdong."

Gross notes that even if Lucent were to kick tail in this segment, that still wouldn't mean much, "because optical switch vendors are still losing contracts to broadband crossconnects, like the Tellabs 6500."

"LambdaUnite is pretty well targeted with the widest interface support," says David Dunphy, an analyst at Current Analysis. Dunphy says the switch's support for a standards-based ring protection scheme gave it an edge over competitors, until Sycamore recently addressed the same issue. He also notes the Deutsche Telekom AG (NYSE: DT) win Lucent talked up last year was significant as a vote of confidence for its LambdaUnite from a Tier 1 carrier (see Lucent Sells LambdaXtreme to DT).

Regarding its announcement, Sycamore says all of its technology developments are linked to specific requests from specific customers. The company says the SN 16000's combination of so many protocols and protection schemes gives carriers lots of flexibility to introduce new services without disrupting their existing operations.

Analysts, however, aren't so sure. "I'm not sure what customer said they need to run UNI 1.0 and GMPLS simultaneously, particularly when it is hard to find a service provider using either protocol," says CIR's Gross. He notes that the company's cash management is probably more important than adding new features at the moment.

Sycamore's SN 16000 counts NTT Group (NYSE: NTT), Vodafone Group plc (NYSE: VOD), and LDCom Networks as its customers. The company won't say whether the request for new features has come from a current or unannounced customer.

In the market for grooming switches (ones that switch individual Sonet channels, as opposed to whole wavelengths), Sycamore and Lucent both trail Ciena and face competition from others, including: Corvis Corp. (Nasdaq: CORV), Marconi plc (Nasdaq/London: MONI), Nortel Networks Corp. (NYSE/Toronto: NT), and Alcatel SA (NYSE: ALA; Paris: CGEP:PA).

Market researchers say that even though the optical switch market took a dive in 2002, it didn't get hit as hard as other equipment segments and may be poised for a bit of a comeback. Probe Research Inc. projects revenues in the area to begin steady growth in 2004, yielding a 143 percent total increase by 2007.

Dell'Oro Group says optical switch revenues for equipment makers were $270.2 million in 2002 and are projected to grow to $328.6 million this year.

Infonetics says Lucent placed third in the optical switch market in 2002 with a 14 percent share; Sycamore was seventh at 5 percent.

— Phil Harvey, Senior Editor, Light Reading

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The Litewave Company
The Litewave Company
12/5/2012 | 3:16:54 PM
re: Optical Switch Market Stirs
We have just been searching the net and found this site.

Our website is www.litewave.co.uk.

The user on these forums is registered with the name Litewave and appears (from other members comments) to be reflecting badly on our name and also that of Litewave Designs.

We would like to make sure that the user "Litewave" is in no way affiliated with www.litewave.co.uk
The Litewave Company
The Litewave Company
12/5/2012 | 3:16:33 PM
re: Optical Switch Market Stirs
Can the above message be deleted please.

puddnhead_wilson
puddnhead_wilson
12/5/2012 | 12:11:00 AM
re: Optical Switch Market Stirs
Maybe it's just a stereotype, but whenever I see an optical contract win in China I always wonder "at what cost?" Will the margins even be positive? Lucent's recalcitrance to give any details sounds a lot like an NT win in discussed in a story here a few months ago, in a time where any business at all is seen as "winning" the NT spokesperson was intentionally downlaying the significance of the contract, as if they were afraid that sounding at all excited about it would be embarassing if the true terms came out ...
puddnhead_wilson
puddnhead_wilson
12/5/2012 | 12:10:58 AM
re: Optical Switch Market Stirs
Shandong, I meant. Sorry.
lighten up!!
lighten up!!
12/5/2012 | 12:10:49 AM
re: Optical Switch Market Stirs
Here we go again with the Optical Switch misnomers. These switches are O-E-O switches and do not switch Optical Layer signals via MEMs or other optical switching technologies. If anything LR should clarify this point and not mislead the public into thinking that the market for Optical Switches has finally emerged. This distinction is very important because it is the clueless analysts who drive investor spendings.
optical_leaders
optical_leaders
12/5/2012 | 12:10:48 AM
re: Optical Switch Market Stirs
I don't think LR should be asking David Gross from CIR for anymore feedback on announcements (or at least correct them before printing) given that he obviously does not know what the LambdaUnite is: a Broadband XC, a MultiRing Terminal, a data ready (ethernet) SDH product etc hence why it has been given the name "optical core switch" which by the way by RHKs definition can be next generation OEO or OOO.

The Tellabs XC is only a B/band XC (like the BWM) (at the moment) and cannot be put in the same category as the CD, SN 16000, LambdUnite etc

LightReading please ensure knowledgeable people are asked questions....
Litewave
Litewave
12/5/2012 | 12:10:47 AM
re: Optical Switch Market Stirs
I don't think LR should be asking David Gross from CIR for anymore feedback on announcements

I second that motion!

From the article...
Analysts, however, aren't so sure. "I'm not sure what customer said they need to run UNI 1.0 and GMPLS simultaneously, ..." says CIR's Gross.

Its pretty obvious to me that Gross has NO FRIGG'N CLUE what hes talking about.
SCPJ24
SCPJ24
12/5/2012 | 12:10:45 AM
re: Optical Switch Market Stirs

The loss to Unite should be a surprise to noone. CIEN will win no contracts in China until they invest in an engineering center over there. Until they do, in my opinion they will never break the market because the local culture will perceive them as not interested -- even if they offer superior products.
dgindc
dgindc
12/5/2012 | 12:10:43 AM
re: Optical Switch Market Stirs
Of course, you cannot name a decent-sized provider who has done anything with GMPLS. I know I'm supposed to wait and see, just like with OC-768, VOD, PON, ISDN, SMDS, GOSIP, FDDI, ATM-to-the-desktop, Free Space Optics, tunable lasers, RPR, and all-optical switches.

We define products by how they actually compete for carrier business, not how vendor PR departments try to postion their equipment. Even though it is just a 3/3 DXC, the 6500 is competing against Unite, CD, Aurora, 16000, and HDX. The overall market for these products is small, however you define them, so the whole discussion of this segment is somewhat academic, particularly when these vendors make more money on interest income from 1999-2000 stock offering cash, than they do from selling products. The biggest laugh we get with our institutional investor clients is when a another analyst firm releases a study declaring a $3 million a quarter company "a winner in optical switching". None of the so-called "optical core switches" has won a major RBOC contract, not to mention that Sycamore, Tellium, and Corvis are all doing under $10 m in sales a quarter.

David Gross, CIR
Belzebutt
Belzebutt
12/5/2012 | 12:10:42 AM
re: Optical Switch Market Stirs
I know I'm supposed to wait and see, just like with OC-768, VOD, PON, ISDN, SMDS, GOSIP, FDDI, ATM-to-the-desktop, Free Space Optics, tunable lasers, RPR, and all-optical switches.


I don't know if RPR belongs in that category, it IS happening. Maybe not for every vendor, but it's selling.
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