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Report Details Component Slide

It will take at least three to four quarters for the optical components market to rebound from its current woes, according to a report published this month by Light Reading's subscription research service, Optical Oracle.

In the meantime, things are set to get worse for both public and private components manufacturers, as excess capacity and an inventory glut cause orders from system vendors to fall shorter and shorter of expectations, the report says.

Titled “Component Conundrum,” the information in the report was gleaned from interviews with executives at more than 40 components companies, as well as in-depth analysis of financial data and company information.

Most of the public companies in the component space will report even more revenue drops over the coming quarters, the report predicts. Some will go bankrupt, and others will be caught up in the merger and acquisition activity required to restore balance to the market. The sector's startups also will be caught up in a painful metamorphosis. Some will go under, as VC funding becomes increasingly tight. Others will accept depressed buyout valuations to avoid hitting the cash wall.

The report postulates that the component companies that are most likely to emerge successfully from the doldrums are those that accurately anticipate the requirements of the service provider market. Right now, it points out, the last thing service providers need is component technologies that simply add more capacity to their networks:

"The market is nowhere near ready for 40-Gbit/s systems... Optical Oracle's survey found absolutely no interest in moving to [40-Gbit/s] OC768. Indeed, carriers have yet to fully standardize [10 Gbit/s] OC192 long-haul configurations."

"Having built their networks on the idea that bandwidth alone would meet customer demand, many providers are finding themselves unable to generate revenues from this capacity," explains Chris Bulkey, Optical Oracle's financial analyst and the author of the report. "In this environment, it's not component technologies that increase the speed of the network that will sell well, but those that allow more efficient and profitable use of existing optical capacity."

Among the growth areas mentioned in the report are arrayed waveguide gratings and interleavers that let systems carry more data over installed fiber. Vendors in this space include Lightwave Microsystems Corp. and Oplink Communications Inc. (Nasdaq: OPLK). Another growth area is optical amplifiers that are optimized for the metro environment, typified by Genoa Corp., Kamelian Ltd., and Opto Speed SA. Also rising in importance are tunable components, from companies such as Bandwidth9 Inc. and Cidra Corp. (Nasdaq: CIDC).

The report also includes earnings forecasts, a detailed explanation of component technology hot spots, and a ranking of the top 10 best-positioned public companies in the sector. It is available to subscribers of Optical Oracle.

-- Mary Jander, Senior Editor, Light Reading
http://www.lightreading.com

Editor's Note: Light Reading is not affiliated with Oracle Corporation.
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Wober23 12/4/2012 | 7:57:56 PM
re: Report Details Component Slide What about the current InP company's for OC-768?
Joeboo 12/4/2012 | 7:57:54 PM
re: Report Details Component Slide uhhhh... what about them?
realguy 12/4/2012 | 7:57:51 PM
re: Report Details Component Slide Yes, 40G is officially dead. Long live sanity!
Wober23 12/4/2012 | 7:57:51 PM
re: Report Details Component Slide What about some of the start-ups such as VSK Photonics? Is 40 Gbps dead or delayed?
badlandstroy 12/4/2012 | 7:57:51 PM
re: Report Details Component Slide Like Cyoptcs? - Dead!!!!!
myresearch 12/4/2012 | 7:57:49 PM
re: Report Details Component Slide I think you are missing the point. The
message is that people do not care so much
about 10G or 40G or anything but the cost, cost
and cost. It's about $ per bit!

optical_guy 12/4/2012 | 7:57:49 PM
re: Report Details Component Slide 40G may makes no sense at current time (my opinion), but this does not seem to dissuade service provides who must be watching Pontiac commercials....eh, wider is better...eh, faster is better.

zbuquet 12/4/2012 | 7:57:47 PM
re: Report Details Component Slide First and foremost companies need to take hold of the current technology by the horns and use their current systems to the capacity that they are capable of. Maybe 40G will be a option in the future but it makes no sense to implement that kind of technology in today's market
flanker 12/4/2012 | 7:57:44 PM
re: Report Details Component Slide "people do not care so much
about 10G or 40G or anything but the cost, cost
and cost. It's about $ per bit!"

Agreed, but this would have been an original observation twelve months ago. The issue with 40G is not that it is not technically feasible but that component costs for 10G are dropping as a result of broad implementation and competition. There is no need to spend the money developing 40G components when 10G component prices are dropping like a rock; not for another 24 months anyway.

Too bad the VCs didnt get this. But then again they are all either English majors from Amherst, (or worse) SOFTWARE engineers.


Petabit 12/4/2012 | 7:57:42 PM
re: Report Details Component Slide If you really think that 40G is dead, fine. Go on, I'll see you in 18 months.

40G will come, no matter what the technical arguments are. There is enourmous bragging rights, especially in these contrained times, to have the biggest / baddest system out there. It's the same as microprocessors - only the techies care that an AMD 1.5G processor is faster than an Intel 2G chip. Never mind the processor, feel the bigger number. Bigger is better, right.

And whatever techie arguments you may say about service delivery, or speed - the average stock analyst does not read the detail of the press release. First to turn on a live 40G system will win.

If you can make a 40G system cost less than 4 times 10G systems, you will sell it. Traffic growth may not be 200% a year, but neither is it 0%.

P.
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