Ovum: Optical networking tops $4 billion in 4Q08

FEBRUARY 19, 2009 -- The figure represented an increase of 4% sequentially, but a decline of 5% versus 4Q07.

FEBRUARY 19, 2009 -- Ovum's (search Lightwave for Ovum) preliminary 4Q08 and full-year 2008 results for global optical equipment networking vendors indicates that the global optical networking (ON) market topped $4 billion for the fourth time in five quarters. This figure represented an increase of 4% sequentially, but a decline of 5% versus 4Q07. Spending for the full year was up 9% over 2007 to $16.3 billion.

"These results, given the global financial meltdown, were stronger than they could have been, but with annualized spending down sequentially for the first time since the dark days of 2003, the impact of the North American recession is clear," remarks Ovum Vice President, Optical Networking Dana Cooperson. "Customer budget approval cycles have lengthened and spending is being focused on areas where the path to revenue is quickest and clearest. Enterprise-related spending has been particularly vulnerable to slowdowns, which has hurt Cisco among others, while basic carrier optical infrastructure has been more resilient."

Top ten ON vendor share
Of the top 10 vendors, only Huawei and Ericsson posted positive 4Q08 results both sequentially and versus the year-ago quarter. Ericsson derived particular benefit from mobile backhaul and mixed wireless-wireline builds. Huawei repeated its "jaw-dropping" 4Q07 performance in 4Q08, posting sequential and year-over-year gains of 38% and 14%, respectively, in part due to pent-up 3G mobile-related spending in China.

"Huawei benefited from the typical 4Q spending surge in China, was strong throughout Asia-Pacific and EMEA (Europe, Middle East, Africa), and as a minor player in North America had little exposure to spending declines there. Alcatel-Lucent held on to market leadership by 5 share points in 2008 (22% share), but faces an increasing threat from Huawei in 2009," said Cooperson.

Regional and product segment highlights
The Asia-Pacific market was particularly resilient in the quarter and the year. Spending in the region overall was up by about 20% in 4Q08, both sequentially and versus 4Q07, mirroring 2008's 20% growth over 2007. EMEA and South and Central America (SCA) regions grew 8% and 12%, respectively, during 2008.

"While regional results are not yet final, North America appears to be the only region where revenues shrank compared with 2007. Looking ahead, North America and Western Europe remain most exposed to lackluster spending in 2009. At the product segment level, metro and backbone WDM sales and undersea spending were strong compared with 2007, while aggregation declined slightly and bandwidth management was roughly flat," noted Cooperson.

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