Infonetics Research reports in its newly released Optical Network Hardware vendor market share tally that the first quarter of this year saw a drop in optical network systems revenues of 23% worldwide to $2.8 billion. The market shrinkage was particularly acute in Europe, which suffered its worst optical communications capex quarter in five years, the market research firm asserts.
The overall picture perhaps looks worse than it might because of the previous quarter’s strength. Optical network hardware spending grew 9% in the fourth quarter of 2011 (see "Infonetics: Optical network equipment up 9% in 4Q11"). Still, the situation in Europe may be dark enough to obscure any shine this caveat might otherwise have produced.
"While optical hardware revenue trends in all world regions were not positive in the first quarter of 2012, the most alarming development is that year-over-year in EMEA - particularly Europe - spending on WDM optical equipment decreased faster than spending on legacy SDH equipment," notes Andrew Schmitt, principal analyst for optical at Infonetics Research. "This is not the behavior of a region experiencing only a minor quarterly pullback. By contrast, the trend in North America was the opposite, with carriers cutting spending year-over-year but allocating towards forward-looking technology investments like WDM equipment and ROADMs."
Unlike other areas of the world, Europe doesn’t show much near-term upside, either.
"EMEA and North America are both now trending downward on a rolling fourth-quarter basis, and Asia Pacific is flat. Still, conversations with vendors and carriers lead us to believe that spending in North America will resume moderate growth and we are forecasting solid gains in optical spending in China this year in large part due to our recent visits with Chinese carriers,” explains Schmitt. “But Europe is a tough call, with macroeconomic trends there not providing much hope and evidence that some service providers there are battening down the hatches."
As is always the case, some companies weathered the storm better than others. For example, Fujitsu and Ciena outperformed competitors in North America, while in Asia NEC and Fujitsu enjoyed 28% gains in 1Q12 from the year-ago quarter. Aside from NEC and Fujitsu, the relative winners in outperforming the market were smaller companies such as Infinera, ADVA, and Transmode, the report states.
ROADM optical equipment spending was flat in 1Q12, which Infonetics considers “an achievement” considering this niche posted a record quarter in 4Q11.
Infonetics' quarterly Optical Network Hardware report provides worldwide and regional vendor market share, market size, and analysis. Equipment tracked includes metro and long-haul SONET/SDH and WDM optical network equipment (transport, ROADM, submarine line terminating equipment), and ports (Ethernet, SONET/SDH/POS, and WDM).