Infinera’s Fallon: 40G opportunity limited while carriers wait for 100G
Besides discussing his company’s fiscal second quarter performance in a call with analysts late July 19, Infinera (NASDAQ:INFN) President and CEO Tom Fallon offered a few observations on the relative market demand for 40-Gbps and 100-Gbps systems.
Besides discussing his company’s fiscal second quarter performance in a call with analysts late July 19 (see "Infinera 2Q revenues at upper end of guidance; 3Q guidance positive"), Infinera (NASDAQ:INFN) President and CEO Tom Fallon offered a few observations on the relative market demand for 40-Gbps and 100-Gbps systems.
Fallon told those on the call that he supported the view of those analysts who have predicted “an optical ramp” that would start next year and continue through 2013 with the deployment of coherent-enabled 100-Gbps technology. (For an example of such an analyst viewpoint, see “Infonetics: Optical reboot sees swift shift to 100G.”) Conversely, 40-Gbps will see deployment as a “tactical bridge” between current fiber exhaust at 10 Gbps and the time when 100-Gbps technology becomes economically attractive in 2013.
However, that doesn’t mean there isn’t money to be made in selling 40-Gbps technology -- or, in the case of Infinera, not losing it. There is significant demand for 40-Gbps capabilities now, Fallon says – and, since Infinera is only now bringing a 40-Gbps line card to market, the company has had to cut prices on its 10-Gbps offerings to forestall potential customers who want to move to a higher data rate from going somewhere else, both Fallon and CFO Ita Brennan said on the call. Fallon also added that analysts tell him that 50% of the 40-Gbps market resides in requirements for non-coherent 40-Gbps systems in China, where the move to 100 Gbps is expected to be slower than in the West. The result is a potential market size of well over $1 billion over the next few years, Fallon said later in the call. He expects Infinera to prosper from 40-Gbps deployments for submarine network applications in particular, he added.
That said, Fallon believes that the majority of carriers want to move to 100-Gbps systems as quickly as feasible. Once the 100-Gbps wave hits, it will wash away at least some demand for 40-Gbps technology, he said. Fallon expects Infinera to be ready to ride that wave, as he predicted carrier lab trials of Infinera’s 100-Gbps systems (which will leverage a new 500 Gbps photonic integrated circuit) will begin at the start of next year. He expects to be able to ship such systems in volume during the first half of 2012.
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