Global optical networking revenues drop: Ovum

For the first time in almost two years, the quarterly global optical networking (ON) revenues has hit a low year-over-year (YoY) margin, according to analyst firm, Ovum.

In its new market share analysis, Market Share Alert: 1Q12 Global ON, the analyst firm found that revenues declined by nine per cent from the year-ago quarter, while annualised spending retreated by $300 million, or two per cent sequentially, wiping out a third of 2011’s gains.

Sales underperformed this year across all regions versus the same period last year, with North America rates down eight per cent, the smallest percentage in the last three quarters, and Eurpoe, Middle East and Africa performing the worst (down 15 per cent, the largest percentage in nearly two years).

Ovum stated that sales in China and Europe also fell sequentially, leading Huawei and Alcatel-Lucent to post their worst global quarterly revenues since 3Q07 and 2005, respectively.

However, Ovum is still forecasting a modest four per cent growth in the optical networking space this year to hit $16.2 billion.

“Preliminary results indicate more a cause for concern than a cause for panic. While 1Q sales are typically lower than 4Q sales, the actual spending last year overshot our $14.9 billion forecast when results in Asia-Pacific and Europe were less negative than we predicted,” Ovum network infrastructure practice leader, Dana Cooperson, said.

Ovum claimed that the poor 1Q12 report is a result of the market weakness expected in late 2011, predominantly due to continued macroeconomic and political challenges in Europe and also due to the fact that 4Q/1Q market seasonality is becoming more pronounced as spending growth shifts to Asia-Pacific and South and Central America.

The report showed that in terms of vendor performance, NEC benefited in 1Q12 from strong sales in its home market, rising 0.4 share points.

Cisco saw strong YoY revenue growth in North America, Asia-Pacific (specifically Japan), and South and Central America.

While Huawei's revenues may have tumbled sequentially, the report stated that its YoY results beat the quarterly market average globally and in Europe, Middle East and Africa.

In the networking space, Ovum mentioned that more vendors have included data center interconnect as a key driver of growth for their business and for use of 100G, control plane, and encryption features.

“However, mobile backhaul remains a ubiquitous growth driver at the network edge, with vendors noting the increasing speed of evolution from SONET/SDH to Ethernet/MPLS for aggregation and transport. As 100G deployments grow, 40G deployments are holding steady,” Cooperson concluded.

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