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DWDM

Huawei Gains Optical Ground in North America

Huawei Technologies Co. Ltd. has cracked the North American optical transport market and could be poised to attract business in larger and larger carriers, according to a new Heavy Reading report.

Huawei has had its share of wins in developing countries but "has been a non-factor in North America to date," analyst Sterling Perrin writes in the report, "Optical Networking for Tier 2/3 Operators in North America."

That status has changed in the past two years, though. Thanks in particular to long-haul DWDM work, Huawei has crept up to become the No. 7 supplier of optical gear to the Tier 2 and 3 North American camp.

Competitors tend to dismiss Huawei's North American prospects, but Perrin believes the company's standing is no fluke.

"Once the door is opened (and it has), it is not difficult to imagine Huawei working its way into bigger networks over time," he writes.

"Over time" could be a shorter period than some think. Infinera Corp. (Nasdaq: INFN), which didn't have a product on the market five years ago, ran away with nearly 60 percent of the Tier 2/3 long-haul DWDM business in North America in the first half of this year, Perrin writes.

The report summarizes market-share figures and profiles three major operators in the North American Tier 2/3 category: AboveNet Inc. (NYSE: ABVT), Mid-Atlantic Broadband Cooperative , and SureWest Communications (Nasdaq: SURW). It also includes profiles of 10 optical vendors.

— Craig Matsumoto, West Coast Editor, Light Reading

acohn 12/5/2012 | 3:25:47 PM
re: Huawei Gains Optical Ground in North America A carrier doesn't need to purchase from them, just bring them into the bidding process on a RFx and watch the other vendors drop their prices faster than GOOG stock price.
Mostly Harmless 12/5/2012 | 3:25:49 PM
re: Huawei Gains Optical Ground in North America Don't get me wrong. I think Huawei is a force to be reckoned with alright.

They have good products, and the ability to discount very heavily. They also have the backing of the Chinese Army to tide them over the current financial crisis!

I'm sure that Huawei could have a great 2H08, and perhaps that was what you were implying in your proverb.

The point of my post is that I thought the Light Reading headline was very misleading compared to the content of this particular report.

My remarks were specific to the data in the report, and are not a comment on Huawei's performance in other markets.

By the way, I agree with Stirling's opinion that any significant presence of Huawei in the N.American market is cause for surprise, and remark by general observers, and for sheer terror by Huawei's competitors :-)
nodak 12/5/2012 | 3:25:49 PM
re: Huawei Gains Optical Ground in North America Ok, if it is just a matter of time before Huawei wins a Tier 1 contract, have they even begun the stringent 3rd party testing the Bells (only Tier 1s really worth considering) require of all of their vendors?
[email protected] 12/5/2012 | 3:25:49 PM
re: Huawei Gains Optical Ground in North America To Mostly Harmless> "Huawei: Small, and Getting Smaller".

Russian proverb says: chikens should be counted in autumn.
paolo.franzoi 12/5/2012 | 3:25:50 PM
re: Huawei Gains Optical Ground in North America
I am saying the US Auto sales of all are the same. The difference is that GM, Chrysler and Ford are hung with horrible union obligations (particularly health care) which go away in 2010. Note that is already negotiated.

If you look outside the US you will find that all these companies (Chrysler is the exception and may not be worth saving), compete effectively.

Here for example is Brazil...remember where they have the whole sugar fuel thing:

Fiat, the market leader, sold 40,764 cars and trucks in November, a 23.6 percent drop from the previous month. Volkswagen sales fell 23.8 percent to 37,466 units, GM sales plunged 32.5 percent to 29,702 vehicles, and Ford sales slumped 29.4 percent to 15,943 cars and trucks. (Reporting by Alberto Alerigi Jr., Writing by Todd Benson; Editing by Derek Caney and Lisa Von Ahn) (from 12/4)

Do a google on automobile sales from various regions and you will find the word "crash" in most of them for November.

So, what you have is an industry trying to reorganize itself from heavy structural issues and a big sales collapse. This has some regional variation and is not specific to US automakers.

seven
malibu 12/5/2012 | 3:25:50 PM
re: Huawei Gains Optical Ground in North America seven,

So you're saying Toyota is in the same shape as GM, Ford and Chrysler?

malibu
paolo.franzoi 12/5/2012 | 3:25:50 PM
re: Huawei Gains Optical Ground in North America
oops forgot to say those are the November sales numbers for Toyota in the US.

seven
cw.774 12/5/2012 | 3:25:50 PM
re: Huawei Gains Optical Ground in North America Walmart and Toyota? Huawei and what? ALU? NT? Come on. China is beginning to look more like a free market than NA in my opinion... but who cares?

The same moral and ethical delimas and implications of markets, those deamed free or otherwise, continue on for every single industry. What's new here?

Scientifically proven: The universe is reletive to those observing/measuring it.

To be debated for infinity: A nation with dissolute culture (who quanitifies this and how?), no pride of it's own origins (judged by whom?), and decreasing understanding of it's citizens or the property of those citizens, intellectual or otherwise (again...says who?), is a nation that has no political party, no national policy and no government of value accept for those that get into governing to protect themselves. "power corrupts, absolute power corrupts absolutely"

Can we please move on? Where's that #2 data point anyway?
paolo.franzoi 12/5/2012 | 3:25:50 PM
re: Huawei Gains Optical Ground in North America
No, actually I have not described the US Auto industry. If the US auto industry followed those guidelines, it would do the smart thing and instantly shutter all US operations. They make a lot of money on all their foreign operations. US consumers are not choosing to buy Toyota's because of slave labor in Detroit. in fact (if you actually analyzed the situation) you would see the following:

All Vehicles 130,307 197,189 -33.9%
Domestic Car 43,648 66,029 -33.9%
Domestic Truck 28,281 43,929 -35.6%
Import Car 33,306 47,612 -30.0%
Import Truck 25,072 39,619 -36.7%
Dom+Imp Cars 76,954 113,641 -32.3%
Dom+Imp Trucks 53,353 83,548 -36.1%
Domestic Vehicles 71,929 109,958 -34.6%
Imported Vehicles 58,378 87,231 -33.1%

seven
malibu 12/5/2012 | 3:25:51 PM
re: Huawei Gains Optical Ground in North America seven,

What you've just described is the United States automobile industry. And if Carriers/Telco's use the same logic, they'll end up at the same table, sitting next to bankruptcy attorneys and facing lawmakers.

malibu
malibu 12/5/2012 | 3:25:51 PM
re: Huawei Gains Optical Ground in North America eramk,

I was referring to depreciation cycles, not service contracts. Just because "evryone is doing it", doesn't mean the "everybody" has a winning strategy.

malibu
Stefan Sip 12/5/2012 | 3:25:52 PM
re: Huawei Gains Optical Ground in North America Huawei is #7 in tier-2/3, was is the big deal?

But Huawei is a dominate global optical vendor, so they can certainly leverage the scale to make rapid gains in the US.

Instead of debating whether people should buy Huawei, that debate is over. People buy more Huawei infrastructure than Moto, Nortel, perhaps even ALU these days. Don't you all think it is just a matter of time before Huawei wins a tier-1 in the US, considering they are already providing a significant piece of the network to Bell and Telus.
paolo.franzoi 12/5/2012 | 3:25:52 PM
re: Huawei Gains Optical Ground in North America
malibu,

If the product is cheaper and does the job, then it should be used. In fact, companies have a legal obligation to maximize their short term and long term profits.

None of the issues that you put down have anything to do with the price paid for equipment and therefore have no reason to change reason to purchase decisions.

"unfair trade practices, labor exploitation, environmental polution, bribes, and IP theft"

Those are your reasons listed. What are important are product price, product quality, service and support, and roadmap.

So, what you are asking is that companies make a social choice that the individual consumer is not willing to. Imagine that you choose not to deploy lowest cost products and you have to have higher prices because of this. It is quite clear (based on Walmart alone) that there is no significant market for mass marketing of these issues. So, no there is no reason for a company not to choose products based on these issues at this time.

seven
malibu 12/5/2012 | 3:25:52 PM
re: Huawei Gains Optical Ground in North America seven,

I don't shop at Wal-Mart, but if I did I would be buying a product that would at most have a 3 year life span, most would be much shorter, like President's Choice soda. Carrier and Telco equipment has a usefull life of over 10 years and some as high as 25 years. Its not blame I'm placing, but questioning the wisdom of choosing Huawei as a vendor, and as such a long-term partner. I myself don't have to contemplate that question long before comming to a decision.

malibu
eramk 12/5/2012 | 3:25:52 PM
re: Huawei Gains Optical Ground in North America Get real, find me a vendor that is willing or able to signup for a 25yr or even 10yr support contract. Most vendors are on lifesupport and implicitly have a shelf life well under 3 years (particularly in light of att and coming telco capex announcements). Who would you partner with?
HomerJ 12/5/2012 | 3:25:53 PM
re: Huawei Gains Optical Ground in North America Indeed. Like their toys, yogurt, human rights, and female gymnasts, that china huawei gear is bound to be tainted somehow.
Sterling Perrin 12/5/2012 | 3:25:53 PM
re: Huawei Gains Optical Ground in North America MH, I understand your point, but I think the title here reflects the findings of the report. I think Huawei has seeded the NA market nicely, and can only grow off of its small starting base. The surprise - to me and others I think - is that they had measurable share in NA at all. They have built this base very quietly. Interestingly, their customers have also been quiet about buying Huawei.

Sterling
paolo.franzoi 12/5/2012 | 3:25:53 PM
re: Huawei Gains Optical Ground in North America
malibu,

As long as you never buy any Chinese good (like say ever shop at Walmart, Kmart, Target, Costco, etc.), you can certainly criticize companies for buying Chinese goods.

Given that Walmart is the worlds largest retailer, don't you think it is a bit hypocritical to put the burden on the telcos?

seven
malibu 12/5/2012 | 3:25:53 PM
re: Huawei Gains Optical Ground in North America If I was buying equipment from Huawei, I would keep it quiet too. I have a question for LR. Should unfair trade practices, labor exploitation, environmental polution, bribes, and IP theft have any bearing on the wisdom of choosing a communications equipment vendor?
malibu 12/5/2012 | 3:25:53 PM
re: Huawei Gains Optical Ground in North America Infinera wins hands down as their PIC offers a much better price/performance curve than anything Huawei can muster.
Pete Baldwin 12/5/2012 | 3:25:54 PM
re: Huawei Gains Optical Ground in North America Touche. I was thinking more of the 2007/2008 levels versus the presumed zero percent Huawei had in 2006 -- not literally zero, but that was the way competitors often treated it.
Mostly Harmless 12/5/2012 | 3:25:55 PM
re: Huawei Gains Optical Ground in North America Really? This must be a new definition of "gaining ground" that I hadn't previously encountered.

I will not reveal the actual numbers because this is part of the valuye of this report, but Table 4.1 on Page 21 of this report shows that Huawei ranks on #7 in revenue, and has actually LOST about 2% of market share between 2007 and 1H2008. 2% is a pretty big drop when you're only at 6.2%. And you have to think they'll sell less in 2H2008 given the current financial situation because smaller players will lose revenue first.

So, call me a bluff old traditionalist, but I think a small accurate headline would be:

"Huawei: Small, and Getting Smaller".

It would have been more accurate to call out ECI and Tellabs' success in growing their market shares over the same period as the headline.
rahat.hussain 12/5/2012 | 3:25:55 PM
re: Huawei Gains Optical Ground in North America oops, sorry i should have referred to ninja as he/she.

odo <-- wondering why in her head, turtle = masculine.
rahat.hussain 12/5/2012 | 3:25:55 PM
re: Huawei Gains Optical Ground in North America Guys,

As they say in the marketing world, this is just a teaser for a HeavyReading report, published on its sister site, LightReading.

Everybody's looking for an angle to generate revenues - HR is no different. Let's try the Tier-2 angle and get ninja to fork over $4K, they said. Ninja's way too smart for that, he wants the answers here on Article Talk! ;-)

odo
ninjaturtle 12/5/2012 | 3:25:56 PM
re: Huawei Gains Optical Ground in North America I would like to know who is #2 and how large a lead INFN has over #2. Just didn't want to fork over 4 grand to find out. Seventh in Tier 2/3 is still a long way out. But as seven said we will have to see. It's a big market and only getting bigger. Both should do well as long as value and technology exist.
paolo.franzoi 12/5/2012 | 3:25:56 PM
re: Huawei Gains Optical Ground in North America
Well, it is really simple.

Is there a opening?

If so, can one of the new vendors show up with either unique functionality or a much lower price for the same functionality?

I don't see any of these being true at this exact moment. So, I don't see an opportunity to break in. Huawei seems more likely than Infinera in any case. As we see consolidation in the T1 carrier companies, they tend to buy from larger sellers. Huawei seems more capable of selling products at a lower price and is significantly larger.

But we shall see.

seven
Pete Baldwin 12/5/2012 | 3:25:57 PM
re: Huawei Gains Optical Ground in North America So, you've got both Infinera and Huawei trying to be upstarts that break into the Tier 1 North American market. Incumbents like Ciena are already there, by definition. Who wins out?
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