Optical networking market reaches $3 billion in 2Q06

Ovum-RHK Market matches best performance in four years

Of the top vendors, Huawei led the pack with 81 percent sequential and 54 percent year-over-year growth, with Nortel and Siemens each posting gains in both measures as well. Alcatel remained the market leader with 15 percent annualized share.

Preliminary analysis of second quarter 2006 results for optical networking equipment vendors. In 2Q06 revenues for the segment were up 18 percent versus 1Q06 and up 11 percent versus the same quarter last year.

2Q06 highlights for the optical networking equipment market and the top seven vendors:

• 2Q06 revenues were $3.0 billion, up 11 percent versus 2Q05 and 18 percent versus 1Q06.

• Huawei's revenues increased 81 percent sequentially and 54 percent versus 2Q05.

• Siemens's revenues increased 33 percent sequentially and 46 percent versus 2Q05.

• Nortel's revenues increased 30 percent sequentially and 7 percent versus 2Q05.

• Alcatel's revenues were up 25 percent sequentially but down 5 percent versus 2Q05.

• Fujitsu's, Lucent's, and Tellabs's revenues were down sequentially, but were at worst flat compared with 2Q05.

Spending in the North American market once again outpaced the other regional markets, topping $1 billion for the second quarter in a row. The North American spending gain was once again broad-based, with metro and backbone WDM growth leading the way as network operators continued expanding their networks to accommodate growing video and packet data traffic.

global spending, particularly for metro and backbone WDM equipment, rose as existing users expanded their footprint and capacity for data and video services and as new builds by non-traditional customers - including mobile operators, MSOs, enterprises, research and education institutions, governments, and utilities - continued to expand, . We saw a bit of softness in spending in the quarter for multi-service SONET devices, particularly in North America, which could signal the beginning of the shift in spending away from SONET/SDH devices as WDM takes over as the foundation of metro core networks. In Asia-Pacific, however, sales of multi-service SDH devices remained quite strong, which we would expect given that the market there is less mature than in North America.

Optical Networking advisory services. Publ 20060830