Will corporate enterprises be buyers of optical infrastructure?
That's something of an eternal question facing optical equipment vendors. Common wisdom is that a few of the very largest enterprises, particularly big financial services firms, might be interested, but the market opportunity is not big enough to command much attention. Vendors traditionally have been much more concerned with the care and feeding of their carrier accounts. And with good reason, as the carriers have been and still are their dominant source of revenue.
That might be changing. In its third-quarter earnings report last week, Infinera Corp. (Nasdaq: INFN) noted that its DTN-X platform had been adopted for the first time by an "industrial type" enterprise customer (as in, a company that is not a big bank or investment house), in the words of Infinera CEO Tom Fallon. (See Infinera Beats Sector Blues With Revenue Jump, Bright Outlook.)
"What we see is that some [enterprises] will start building their own WDM types of networks for certain applications," Fallon said on the earnings call. "Whether it's next year or over the next 10 years, with people building more data centers, optical will become more of the fabric of the way you do business."
Still, even as Infinera eyes the potential for more enterprise business, Fallon tamped down expectations. "It's something that we need to pay attention to, but it won't ramp up quickly," he said.
Fallon's comments on enterprises further reflect how broadly the data center evolution is affecting the network infrastructure market. New buyers are not so recognizable from years past. These new buyers may not be traditional telecom service providers at all. Their emergence can be comforting to vendors that have too often seen carrier capex dips spoil their earnings -- provided the vendors know what to do about it. (See Optical Vendors Optimistic Despite Shrinking Market.)
— Dan O'Shea, Managing Editor, Light Reading