Top 5 Systems Vendors
- Nortel Networks
- Lucent Technologies
- Cisco Systems
The optical systems market is set to experience a 2% growth in sales this year, according to Merrill Lynch analyst Simon Leopold—good news considering the last three years have seen sales declines of 35%, 49%, and 21%, respectively. Optical systems as a percentage of carrier capital spending should stabilize at about 6% this year and net $8.2 billion.
So which companies will reap the benefits of this slight uptick in spending? While a number of startups have introduced critical systems technologies, the big guys have made Lightwave's Top 5 list of optical systems houses.
Alcatel, certainly the most diversified company in terms of geography, customer base, and product portfolio, is Lightwave's pick for the number one supplier of optical systems—and that's in spite of steady quarter-to-quarter losses. The company has several key customers, among them Verizon Communications, SBC, and BellSouth in the United States. Last year, Alcatel inked a metro DWDM deal with Sprint as well. But the French company has succeeded around the world. It has supplied equipment for a 350-km network for the Hellenic Telecommunications Organization to support the 2004 Olympics in Athens; a 10-Gbit/sec project for PT Comunicações in Portugal; and an upgrade of the Sea-Me-We 3 network in the southern North Sea. And Alcatel continues to increase its presence in Asia as well; its majority-owned subsidiary, Alcatel Shanghai Bell, landed a multimillion-dollar contract with China Telecom.
The vendor has also been active in the fiber to the premises (FTTP) space, introducing its 7340 Fiber-to-the-User (FTTU) business optical-network termination (B-ONT) family. Alcatel had been the early favorite and frontrunner in the jointly developed RBOC FTTP RFP before Verizon named AFC its winner. At press time, BellSouth and SBC had yet to announce their decisions.
Nortel Networks comes in number two among the Top 5 systems companies, despite a 1–2% slip over the last couple of quarters. The company posted $2.27 billion in revenue in the third quarter of 2003, some $245 million of which came from its optical business.
Nortel garnered several key contracts last year, including one from Sprint for the OPTera Metro 3000 and OPTera Metro 5000 multiservice platforms, which support next-generation SONET and DWDM. Like Alcatel, Nortel is also increasing its presence in Asia, announcing contracts with NTT Communications, Shandong Unicom, and Korea Telecom.
The company has been busy on the new-product front, launching a new optical multiservice edge platform, a DWDM terminal for its OPTera Long Haul system, and storage over SONET/SDH for the OPTera Metro portfolio. Nortel also enhanced its optical Ethernet and enterprise portfolios, including the addition of CWDM technology.
Lucent Technologies nabs the number three spot among Top 5 systems houses, though it too has lost revenue over the last few quarters. The company announced fourth quarter 2003 earnings of $2.03 billion, with optical networking accounting for some $215 million of that total.
According to Merrill Lynch's Leopold, Lucent is poised to gain the most market share (2%) in 2004, thanks to recent next-generation SONET contracts with AT&T, BellSouth, and Verizon. All three carriers are deploying Lucent's Metropolis DMX Access Mux. AT&T's multiyear agreement also includes the Metropolis DMXtend Access Mux, while Verizon has purchased the LambdaUnite multiservice switch (MSS) as part of its three-year deal with Lucent.
Lucent appears to be doing quite well in other parts of the world as well. In 2003 alone, the company won optical equipment contracts from Asia carriers Jiangsu Unicom, Shanghai Metro, Shandong Unicom, Zheijiang Telecom, Hunan Unicom, Guandong Eastern Fibernet Co., and Seoul, South Korea-based Hanaro Telecom. European customers include Deutsche Telekom for the Metropolis AM access multiplexer and TransLAN Ethernet cards and Deutsche Telekom subsidiary T-Systems for the LambdaUnite MSS optical switch.
Cisco Systems, which ranks fourth among the Top 5, registered its first major RBOC win this year, thereby "moving into the ranks of the tier one vendors," reports Sterling Perrin, senior research analyst at IDC. Last June, BellSouth selected the Cisco ONS 15454 multiservice provisioning platform (MSPP) as part of its plans to migrate its traditional SONET network to scalable optical infrastructure.
Other wins for the ONS 15454 include SURFnet, a Dutch computer network for education and research; Italian metro Ethernet service provider Acantho; and Tokyo-based Mizuho Corporate Bank. Cisco also won several contracts with its ONS 15600 multiservice switching platform (MSSP) last year, including facilities-based metro service provider Looking Glass Networks and independent telephone company SDN Communications.
With Cisco, "it was always a question of how committed they really are to the special requirements of the service-provider market," says RHK's Dana Cooperson. "It certainly does seem that they are getting more serious." In a clear sign of its commitment to the optical space, Cisco announced last year that its ONS 15600 MSSP and ONS 15216 metro DWDM optical filter completed the Telcordia OSMINE (operations systems modifications for the integration of network elements) process, which essentially makes these products "RBOC-ready." It would appear to be a good move, as Merrill Lynch has speculated that Cisco may be "gaining traction in a range of carriers, including Sprint, AT&T, SBC, and Qwest."
Fujitsu rounds out Lightwave's Top 5, holding steady over the past couple of rolling four-quarter periods with an 8% market share, according to RHK. The company remains strong in its home territory, but recent high-profile contracts with incumbent carriers have boosted its reputation in North America, where it has emerged as a dominant player in the next-generation SONET market.
Last April, SBC selected the company's Flashwave 4500 MSPP for the delivery of next-generation SONET and Ethernet services. Two months later, Fujitsu inked a three-year deal with Verizon for the delivery of the Flashwave 4500, 4300, and 4100. The Verizon deal was critical for Fujitsu, since the company had just been edged out by Cisco for the BellSouth contract.