Ovum-RHK: Optical networking market topped $3.2 billion in 4Q06

FEBRUARY 15, 2007 -- Ovum-RHK (search for Ovum-RHK) today announced its preliminary analysis of fourth-quarter 2006 results for optical networking equipment vendors. In 4Q06 revenues for the segment were up 6% versus 3Q06 and up 10% versus the year-ago quarter.
 
Of the top vendors, Alcatel outdistanced the competition with a new high of $659 million in sales for a 20.1% share. The newly merged Alcatel-Lucent became the first vendor to control over 20% (24.2%) of the $11.9 billion annual optical market. Revenue for the company was up 5% sequentially and up 2% year-over-year due to Alcatel's extremely strong performance in EMEA, most notably in WDM.

Huawei posted a 42% revenue increase over 3Q06 (23% over 4Q05) in what is traditionally a strong quarter for this competitor, say Ovum-RHK analysts. Huawei's showing in EMEA and China was particularly strong.

Spending in the North American market slid below $1 billion for the first time since 4Q05 due to a pullback in spending from some of the largest buyers, most notably AT&T and its merged or merging entities-- including Cingular and BellSouth--and Verizon. Vendors with dependence on these large North American carriers (e.g., Lucent, Siemens, and Tellabs) tended to fare worse than average in the quarter, say analysts. Only Fujitsu Network Communications weathered the quarter with only a slight decline despite its exposure.

Spending in EMEA was particularly strong in the quarter, topping $1.1 billion and outdoing expectations due to strong sales of multi-service SDH, metro WDM, and multi-reach (backbone) WDM gear. Vendors with good coverage across EMEA (e.g., Alcatel, Ericsson, and Huawei) tended to fare better than average in the quarter.
 
"The pause in spending in North America at the end of 2006 contrasted with strong performance in the other global markets, particularly Europe and China," notes Dana Cooperson, vice president of optical networking and practice leader of network infrastructure at Ovum-RHK. "The optical network spending outlook for 2007 is good, particularly for metro and multi-reach WDM gear, multiservice aggregation products, and core switching gear," she says. "Advanced Ethernet features are highly sought-after by buyers of all three types of devices, and vendors are responding with ever-more-capable products. Global spending is being driven by bandwidth growth across a spectrum of broadband wireline and mobile applications, with video services growth representing huge upside to optical vendors," Cooperson adds.

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