Huawei, ZTE Buck Optical Trend

Huawei Technologies Co. Ltd. is now the undisputed leader in the telecom optical equipment market, knocking Alcatel-Lucent (NYSE: ALU) from the top spot, Ovum Ltd. reports.

According to third-quarter statistics gathered by the research house, Huawei's optical revenues have "surpassed long-time leader Alcatel-Lucent’s by over $100 million for each of the first three quarters this year," and the Chinese vendor now leads the market by about three percentage points.

Huawei has been creeping up on AlcaLu for some time and has been pressuring its rival in other key equipment segments, too. (See Huawei Aims for Optical Crown, Huawei Overtakes AlcaLu – Again! , Huawei Boasts DSL, Softswitch Lead, and Huawei Rivals AlcaLu for DSL Crown.)

Huawei is also one of only two vendors to increase optical infrastructure revenues during the third quarter of this year, according to Ovum, with the other being fellow Chinese firm ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763).

The rest of the market's players saw their revenues shrink as the overall market dipped by 4 percent sequentially and 10 percent year-on-year to $3.6 billion, according to Ovum's figures.

Huawei and ZTE are bucking the trend because they're benefiting the most from the frantic rollout of new transport networks in their domestic market, where the three major Chinese carriers are plowing billions of dollars into their 3G access and core networks. (See ZTE Rides High on Chinese 3G, China 3G Update: App Stores & iPhones, and ZTE Tops 3G Tender.)

ZTE has benefited so much, in fact, that Ovum places it in the fourth spot in its optical ranking, edging Fujitsu Ltd. (Tokyo: 6702; London: FUJ; OTC: FJTSY) into fifth.

While the rollouts in China are helping the Asia/Pacific optical equipment market to "exceed expectations," Ovum says the EMEA (Europe, Middle East, and Africa) and South and Central America regions "remain moribund," while the "bleeding in North America appears to have stopped."

Market conditions overall do appear to be improving, though. Ovum notes that a number of optical vendors reported sequential growth during the third quarter, including Fujitsu, Cisco Systems Inc. (Nasdaq: CSCO), NEC Corp. (Tokyo: 6701), and Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA), while the research company expects Nortel Networks Ltd. to also report a quarter-on-quarter increase in optical revenues. (See Tellabs Profits in Q3 and Cisco Reports Q1.)

In terms of overall market rankings, Ovum says Nokia Networks , having held fifth place just a year ago, has slipped to ninth, just behind Tellabs, while Cisco has edged out Ciena Corp. (NYSE: CIEN) for tenth place.

Ciena's ranking will, of course, improve if it's successful in its bid to buy Nortel's Metro Ethernet Networks (optical division), though it does appear to have competition to acquire that asset. (See Nokia Siemens: Hot for Nortel's MEN? Smith: Why Ciena Wants to Reign Over MEN , and ITU: Ciena Bids $521M for Nortel's MEN.)

The auction for Nortel's MEN division is due to take place this Friday, November 13. (See Nortel's MEN Auction Set for Nov. 13.)

— Ray Le Maistre, International News Editor, Light Reading

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