Optical Networking Market has Best Quarter in Six Years—Ovum RHK

Ovum RHK has announced its preliminary analysis of second-quarter 2007 results for optical networking equipment vendors. In 2Q07, global revenues rose 14 percent versus 1Q07 and 20 percent versus the year-ago quarter to $3.5 billion.

"Results were positive across all regions and all next-generation product segments; thanks to AT&T, spending was strong even in legacy long-haul DWDM. Continued slow spending in the Japanese market provided the only real disappointment, with local vendors, most notably Fujitsu, bearing the brunt of the stagnation there," noted Dana Cooperson, Vice President, Network Infrastructure at Ovum RHK. "Annualized spending reached $13.2 billion. Top ten vendors who posted the best 2Q07 results included Alcatel-Lucent, Ciena, Huawei, NEC, and Tellabs, which enjoyed exposure to some or all of the following: the seasonal rebound in spending by Chinese customers; growth in North American metro and backbone DWDM deployments; and general spending strength in EMEA."

2Q07 highlights for the optical networking equipment market:

- Global spending grew 14 percent versus 1Q07 and 20 percent versus 2Q06 to $3.5 billion.

- Growth in metro WDM spending continues, topping $2.4 billion annually and erasing last quarter's previous record of $2.2 billion.

- Backbone DWDM spending also set records, with annualized next-generation backbone equipment spending exceeding $1.9 billion, 82 percent growth over the period ending 2Q06.

- The undersea market shows continued signs of recovery, with annualized terrestrial line termination equipment spending topping $300 million, a 21 percent increase over 1Q07.

- The creation of "megavendors" Alcatel-Lucent, Ericsson, and Nokia Siemens Networks continues to shift competitive dynamics, with competitors trying to counter these large vendors' end-to-end, service, and equipment value propositions with specialist approaches.

- Alcatel-Lucent remained the only vendor with over 20 percent share; it grew revenues 23 percent sequentially and 30 percent over 2Q06.

- Huawei posted the largest sequential gain (56 percent) of the top ten vendors due to seasonal strength in China and improving results around the globe.

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