Where's the Optical Market At?
Anyone of a nervous disposition should steer clear of the optical transport networking sector just now, because it's a rollercoaster ride for the equipment suppliers at the heart of the market.
At least for now…
According to market analysis by Infonetics Research Inc. , the optical transport equipment sector grew 27% quarter-on-quarter to $3.3 billion in the April-June period, but dipped during the third quarter and is set for a tough end to the year.
"We expect tier 1 carriers to dial back spending" as 2013 ends, noted optical analyst Andrew Schmitt. "Capex was so strong in the first and second quarters of 2013, it's unreasonable to anticipate a big flush in the fourth quarter, especially in North America. There's a general weakness in the market, even from carriers that didn't aggressively ramp spending earlier this year."
That might show up in the upcoming financials of Ciena, which is set to announce its fiscal fourth-quarter results (for the three months ended November 2) on December 12. Jefferies & Co. Inc. analyst George Notter expects Ciena to hit its target of revenues in the $550 million to $580 million range for that quarter, but he expects the vendor's guidance for the three months running to the end of January 2014 to be shaky. He is "nervous" about spending trends at two major Ciena customers, AT&T Inc. and Verizon Communications Inc., with the latter wanting to conserve cash ahead of the monster deal to buy out Vodafone Group plc (NYSE: VOD) from Verizon Wireless , an acquisition that is set to close during the early months of 2014.
But that may be a short-lived issue. Beyond January, Notter is "feeling pretty good" about the following quarters, believing that carriers still have investments to make in optical and routing capacity following something of a drought in the years prior to 2013.
And the longer-term prognosis is encouraging, if the folks at Ovum Ltd. have rubbed their crystal balls correctly: Ovum predicts the optical networking market will grow by more than 3 percent per year 2012-2018, by which time the global market will be worth more than $17.5 billion.
— Ray Le Maistre, Editor-in-Chief, Light Reading