Optical long haul recovers in 2005 with 32% gain

Infonetics: Worldwide optical revenue increased 19% between 2004 and 2005, to $10.7 billion, driven by strong growth in the metro equipment segment (up 15%) and the long haul segment (up 32%). 2005 was the first time we've seen a gain in the optical long haul segment since 2001, a good sign that carriers realize that investing in today’s long haul equipment will save them money in the long run through operational returns. The new long haul WDM equipment provides greater efficiencies through ROADMs and other advanced features, enabling carriers to address competitive pressures, rising broadband traffic, and IPTV opportunities. As more carriers upgrade their networks, we'll see steady growth in the optical market at least through 2009.

Although the long haul segment is improving, the bulk of spending continues to be in metro optical equipment, which made up 71% of all optical network hardware revenue in 2005, compared to long haul’s 29%. This 70:30 ratio will remain about the same through 2009, as increased corporate network traffic, storage networking, consumer broadband demands for services such as IPTV, and service provider wireless network backhaul investments continue driving metro spending.

• Optical network hardware revenue was up 10% to $3.0 billion between 3Q05 and 4Q05, fueled by gains by Adva, Alcatel, Ciena, Corrigent, ECI, Huawei, Siemens, Tellabs, and others; Cisco, Fujitsu, and NEC were down for the quarter

• Alcatel continues in first position for worldwide optical network hardware revenue share in 2005, followed by Nortel, Huawei, Fujitsu, and Lucent

• In 2005, WDM hardware made up 32% of total optical revenue and will increase to 40% in 2009; WDM ROADM switch hardware made up 19% of WDM revenue and will increase to 37% in 2009

• North America accounted for 32% of total optical network hardware revenue, EMEA for 33%, Asia Pacific 29%, and CALA 6% in 2005

Optical Network Hardware Publ 20060227