Strong North American sales can't stop 3Q13 optical network market decline says Ovum

Echoing the sentiments of other market research firms (see "Infonetics expects downturn in optical network hardware spending"), Ovum reports that global spending on optical network equipment declined sequentially in the third quarter of this year. The downturn came despite a strong three months in the North American market.

The quarter saw fiber-optic network systems sales of $3.7 billion, down 9% from the previous quarter (see “Optical hardware sales resume growth says Ovum”) and flat year-on-year. In fact, the optical network hardware market has only seen two quarters out of the last eight in which sales surpassed those of the year-ago quarter, Ovum says in its new “Market Share: 3Q13 Global ON” report.

Strength in North America wasn’t enough to offset weakness in Asia-Pacific, EMEA and South & Central America. Optical system sales in North America reached $1.1 billion in 3Q13, making the quarter the second consecutive three-month period to surpass the $1 billion mark. Sales of converged packet-optical transport systems and 100-Gbps technology led the way in North America. And companies with strong exposure to the North American market managed to increase revenues sequentially despite the overall downturn. Ovum cites Ciena, Fujitsu, and Infinera as three companies who rode strength in the region to higher sequential revenues, with Fujitsu enjoying its best revenue quarter since 1Q08.

Those looking for bright light amidst the darkness of the downturn should look toward converged packet-optical (CPO) and 100G, says an Ovum analyst.

“Total spending may be under pressure, but when it comes to deploying the latest infrastructure to support exploding bandwidth requirements, the demand for 100G, OTN, and packet switching capabilities provided by CPO gear continues to see strong growth among operators,” explains Ron Kline, principal analyst, network infrastructure at Ovum. “CPO has now reached a tipping point, representing greater than 50% of total [optical network] spending for the second consecutive quarter in 3Q13, a trend we expect to accelerate in 2014. This is just the beginning of the next upgrade cycle. The data center is the new central office, and operators are refreshing network technology to address changing traffic patterns as the steady march to IP continues.”

Although revenues from CPO equipment shrank for the first time in a year thanks to reduced spending in Asia-Pacific, annualized CPO sales exceeded $7 billion for the first time in 3Q13 Ovum says.

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