Research: Metro Optical Peps Up
Infonetics Research Inc. says worldwide spending on Sonet/SDH equipment and WDM gear dropped 7 percent in the first quarter 2003.
In that time, customers bought $2.1 billion worth of gear, of the total $8.5 billion the firm forecasts they'll spend this year. Last quarter, they spent $2.2 billion, which represented a 5 percent uptick from the quarter before.
Bottom line? Despite small ups and downs, overall sales are holding flat. Also stabilizing is the ratio between sales of metro gear, which continues to hold two thirds of the market, and long-haul equipment, which holds one third.
"Last quarter was up, which could have been a capex budget flush for carriers in the fourth quarter," says Michael Howard, Infonetics principal analyst and co-founder. Then, in North America, carriers tightened the purse strings for the first quarter of a new year in which economic factors were especially uncertain.
Howard's loath to call a bottom despite flattening revenues, and he says slow growth in optical networking will be the order of the day at least until next year. "By 2004 or 2005, we'll see sales up modestly, perhaps single-digit," he says.
Meantime, there are some interesting radar blips. In the metro market, WDM gear, accounting for about 13 percent of all metro revenue (compared to one third of revenue for the long-haul segment), was up 2 percent this quarter. Howard attributes this growth to rising demand for Gigabit Ethernet and storage links. Also, CWDM products are attracting carriers that seek to offer these kinds of links to corporate users.
Three vendors accounted for 37 percent of all growth in metro WDM, according to Infonetics: ADVA AG Optical Networking (Frankfurt: ADV), Cisco Systems Inc. (Nasdaq: CSCO), and Nortel Networks Corp. (NYSE/Toronto: NT).
Also in metro, sales of passive optical networking (PON) gear rose 3 percent this quarter -- a trend that confirms news of ongoing broadband deployments in the Asia/Pacific region.
On the long-haul side, where Sonet/SDH shipments represent over two thirds of sales, there was growth in demand for next-gen Sonet gear, according to the firm. Indeed, sales of intelligent optical switches were up 15 percent, although this is a tiny sliver of the overall Sonet/SDH market, Howard concedes.
Other firms' reports seem to come to the conclusion that optical transport gear is flattening out. The Dell'Oro Group, for instance, reported worldwide optical transport equipment revenues of $1.5 billion for the first quarter, of which 30 percent went to DWDM gear, 66 percent to Sonet/SDH, and 4 percent to optical switches.
Dell'Oro says the drop is "modest" compared with the same time last year.
— Mary Jander, Senior Editor, Light Reading