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Optical networking vendors face shrinking market

Jack Loo | Nov. 23, 2012
Time for vendors to position next generation products for 2013

The global optical networking (ON) equipment market continued to contract for the third consecutive quarter, according to analysis from research firm Ovum.

Vendors with strong exposure to weaker North America and EMEA (Europe, Middle East and Africa) markets are cutting costs and restructuring operations to ride out the current economic storm, said Ovum analysts. The agency also observed that operators in troubled economies are running networks hotter in an effort to delay network projects and defer spending.

While spending is up 14 percent in Asia Pacific compared with Q3 2011, it is not enough to offset declines of 11 percent in North America, eight percent in EMEA and four percent in South and Central America.

According to Ovum, global spending in the quarter dropped one percent compared with Q3 2011 to US$3.7 billion. "It will be very difficult for the market to reach the two percent growth we have predicted for the year. Now is the time to position next-generation products with operators which will have no choice but to turn spending back on in 2013," said Ron Kline, principal analyst network infrastructure at Ovum.

In terms of vendor performance, Ericsson, Fiberhome, Huawei and NEC were the only top vendors to post both sequential and year-over-year revenue growth. Nokia Siemens, Tellabs and ZTE posted sequential and year-over-year revenue declines, with Alcatel-Lucent's quarterly revenues falling below US$400 million for the first time and its rolling revenues falling below an all-time low of US$2 billion.

"With three uninspiring quarters of 2012 behind us, we are advising our clients that the global market will likely contract into the US$14.5-15.0 billion range, a further retrenchment from our Q2 alert guidance. A modest "budget flush" factor is included in our revised estimate but we are not anticipating a largescale buying spree that would recoup all the ground lost in the three earlier soft quarters," said Kline.


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