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Where's the Optical Market At?

Ray Le Maistre
11/21/2013
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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

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sam masud
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sam masud,
User Rank: Light Sabre
11/22/2013 | 10:42:49 AM
Re: Grammar - SDN impact on optical
Ray,

I really am skeptical about the various market forecasts coming out on the telecom equipment market because I'm not sure if the impact of SDN and also NFV (ergo lower capex) has been factored into the projections.

 
DOShea
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DOShea,
User Rank: Blogger
11/22/2013 | 10:41:57 AM
Dell'Oro
Add Dell'Oro Group to the chorus of caution. New report says WDM segment is weakening in the current quarter after three stron ones: http://www.delloro.com/news/north-america-wdm-market-grows-nearly-20-percent-in-first-nine-months-of-2013-according-to-delloro-group
Ray@LR
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[email protected],
User Rank: Blogger
11/22/2013 | 8:18:35 AM
Re: Grammar
That's the spirit I took it in.... (or, That's the spirit in which I took it... or, Yeah!)

English, eh? 
jeff.mcmillan@cyaninc.com
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[email protected],
User Rank: Light Beer
11/22/2013 | 7:57:12 AM
Re: Grammar
I meant to put a :) at the end, BTW. 

 
MarkC73
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MarkC73,
User Rank: Light Sabre
11/22/2013 | 4:35:15 AM
Re: Grammar - SDN impact on optical
I doubt that SDN will affect the transport guys any time in the immediate future, as even the direction and role that they play is still being hashed out.  Hopefully, even if Telcos are dialing back EoY spending it will mean some pent up demand at the beginning of the year, I mean growth isn't going anywhere.  It does show that sometimes having a deeper portfolio as a vendor can help you adjust when market focus shifts so quickly.
Ray@LR
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[email protected],
User Rank: Blogger
11/22/2013 | 4:15:21 AM
Re: Grammar - SDN impact on optical
'I am curious about the impact SDN will have on the optical market.'

 

Join the club! In fact, let's make that "curious about the impact SDN will have on every communications equipment development and supply chain and the way on which the resulting technology will be deployed and used by network operators."

We may have a better understanding by the end of 2014 - things are moving fast!
Ray@LR
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[email protected],
User Rank: Blogger
11/22/2013 | 4:12:20 AM
Re: Grammar
haha - Jeff, of course you are totally correct. I was being a 'sad dad' and riffing on 'youth speak' - I must have had a shot of espresso too many Thursday afternoon.

Good to see you on the message boards!

Ray

 
sam masud
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sam masud,
User Rank: Light Sabre
11/21/2013 | 4:41:56 PM
Re: Grammar
Bosses have that prerogative :-)

 

On the somewhat more serious side, I, for one do not have an answer, but I am curious about the impact SDN will have on the optical market.
jeff.mcmillan@cyaninc.com
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[email protected],
User Rank: Light Beer
11/21/2013 | 4:10:44 PM
Grammar
Don't end your headline in a preposition. 
Ray@LR
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[email protected],
User Rank: Blogger
11/21/2013 | 3:39:35 PM
Fingers crossed
Oh, let's hope that Ovum is more right tha wrong because

1) The market could do with some positive news

2) It'll keep moe companies in business

3) There's a chance the operators might have enough capacity to cope
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