Ciena's opex flex

Ciena is still the name to beat in the optical networking sector, despite a slight dip in revenues in its most recent quarter. And its hardware and network automation businesses seem to intersect around helping carriers save operational expenses.

When looking over the vendor's accomplishments this year, the headlines all point to big hardware that moves bits around the world at astonishing speeds, and the kinds of companies consuming it. The company reported that it now has 65 total customers for its WaveLogic 5 Extreme coherent optics – the company's coherent modem that can support line rates from 200 Gbit/s to 800 Gbit/s, in 50 Gbit/s steps. By comparison, Ciena has 579 customers of its 100G (or higher) technology.

Even if network operators aren't maxing out the WL5 Extreme at 800G, the company's CEO, Gary Smith, told Light Reading this week that the transport efficiency at all speeds is dramatically improved, and service providers are excited to push towards a lower cost-per-bit.

Only two thirds of the 65 WL5 customers are likely telco, cable or network operator business, the company said. It doesn't (or won't) break out the numbers exactly, but Ciena uses WL5 Extreme modems shipped with its 6500 optical transport platform as a proxy for how many are telcos. So around 20-plus 800G customers were likely webscale cloud and content providers, using Ciena's Waveserver 5 compact interconnect platform for data center interconnections.

Webscale wins continue

Ciena's sales directly to webscale players contributed 22% of its total revenue. That's held steady for a number of quarters and it certainly doesn't mean the business is under strain. "We're putting a lot more capacity out there than the market growth would indicate," Smith said.

Over on the software side of the house, helping service providers automate their networks is growing. The company's Blue Planet software unit had record sales for the quarter and added 11 new customers. The company's networking platforms make up about two thirds of its revenues, but the software business is "strategically important, because it creates a different engagement with the customer," Smith said.

As networks aim to cut costs, Smith said helping operators cut their operating costs is a priority. Many telcos, products of decades of acquisitions, have legacy OSS/BSS and dozens of manual processes that need to go away. "It's a dog's dinner," Smith said, of some carrier back offices.

"When I have conversations with the executives at the service providers around the world, it's their number one issue," Smith added. "Their number one issue is around their operating expenses, their operating efficiency. And they know where they want to go, it's just that the journey is just so painful and so difficult for them."

Ciena expects that its calendar year 2021 will start slow, pick up steam and that its revenues will grow about in-line with the market, at a rate of "zero to three percent," according to the company's conference call transcript from Thursday. And it might be pulling its punches.

The analysts at MKM Partners labeled Ciena's guidance as "conservative," citing data from Dell'Oro Group that the optical systems market alone is set to grow 3% year-over-year. If Ciena does expect to "gain market share and grow faster than the overall market, we see CIEN's guidance on the surface as overly conservative," the analysts wrote.

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— Phil Harvey, Editor-in-Chief, Light Reading