Infonetics: Despite economy, optical network hardware market up 5%

March 2, 2009

MARCH 2, 2009 -- Huawei nearly closed the gap with perennial market leader Alcatel-Lucent in 4Q08 with its 39% increase in worldwide optical revenue, leaving only a three-point difference in share between the two vendors, say Infonetics analysts. Ericsson, Nortel, and ZTE also posted strong quarters.

MARCH 2, 2009 -- Worldwide optical network hardware sales increased 5% to in 4Q08 over 3Q08, to $4 billion, reveals a new quarterly Optical Network Hardware report from Infonetics Research (search Lightwave for Infonetics Research).

"The optical network hardware market fared well in the fourth quarter of 2008 and for the year overall, considering the economic climate and the devaluation of the Euro," reports Michael Howard, principal analyst at Infonetics Research. "The pressure to upgrade equipment is still there because mobile and data traffic continue to mount, and the number of mobile broadband subscribers continues to grow rapidly. The issue now for the telecom industry in general, and the optical market in particular, is whether service providers will increase their spending in the latter half of 2009 to fulfill the guidance they've already given for the full year," he says. "This is a big unknown."

Though impacted by currency devaluation, the optical network hardware market is up 8% for the year, driven by traffic pressures, long haul build outs, WDM investments, and very strong results posted by Huawei in 4Q08.

Other highlights of the report include the following:

• Until 2008, worldwide optical hardware sales had been growing at a double-digit annual rate since 2003.

• The shift from SDH/SONET equipment to WDM equipment continues, with 54% of all North American optical equipment dollars going to WDM, 46% to SONET/SDH in 2008; the EMEA split is similar.

• Huawei nearly closed the gap with perennial market leader Alcatel-Lucent in 4Q08 with its 39% increase in worldwide optical revenue, leaving only a three-point difference in share between the two vendors.

• Alcatel-Lucent, which usually posts big optical revenue gains in the fourth quarter, posted a small loss in 4Q08 in U.S. dollars, but an 18% gain in Euros.

• Ericsson, Nortel, and ZTE also had a strong quarter, as did some of the smaller players in the optical network hardware market, including Corrigent, Infinera, and Sycamore.

• Combined first-generation and second-generation packet optical transport systems (POTS) equipment revenue increased 60% in 2008 over 2007.

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