Optical networking market reaches $3 billion in 3Q06

Best performance since 1Q02

Of the top vendors, Alcatel destroyed the competition with $516 million in sales for 16.8 percent share. Nortel (10.1 percent share) edged out Huawei (9.5 percent) to capture second place in the quarter. In terms of annualized share, the top three vendors were Alcatel, Huawei, and Nortel.

Ovum-RHK has announced its preliminary analysis of third-quarter 2006 results for optical networking equipment vendors. In 3Q06 revenues for the segment were up 5 percent versus 2Q06 and up 13 percent versus 3Q05.

3Q06 highlights for the optical networking equipment market and the top ten vendors:

• 3Q06 revenues were $3.1 billion, up 13 percent versus 3Q05 and up 5 percent versus 2Q06
• Alcatel's revenues were up 27 percent sequentially and up 21 percent versus 3Q05 to lead the market both in 3Q06 and in annualized share
• NEC's revenues were up a stunning 55 percent sequentially and 34 percent year-on-year; it increased sales in all regions and product segments in which it competes to edge out Cisco for ninth market position (rolling 4Q share)
• Lucent's sales grew 11 percent in the quarter but declined 7 percent versus 3Q05, dropping from fourth to fifth place (rolling 4Q share)
• Nortel's revenues increased 5 percent sequentially and 8 percent versus 3Q05 to remain in third place (4Q rolling share)
• Huawei's revenues dropped 27 percent sequentially off a huge 2Q06 but were up 24 percent versus 3Q05 to remain number two in annualized share.

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

'Global spending continues to grow as bandwidth required for broadband wireline and mobile applications puts pressure on operators to both expand existing networks and build new ones. We continue to see growth in builds by non-traditional customers - including mobile operators, MSOs, enterprises, research and education institutions, governments, and utilities - as well as network expansions by the more traditional telcos,' said Dana Cooperson, Vice President, Optical Networking and Practice Leader, Network Infrastructure at Ovum-RHK. 'The softness we reported in 2Q06 spending for multiservice SONET/SDH devices widened to include all three major regions, with evidence mounting that the shift in spending away from SONET/SDH devices to metro WDM in the metro core has begun; only CALA bucked the trend this quarter. Still, the multiservice SONET/SDH market remains about three times the size of the metro WDM market, and there is very little evidence that Layer 2 switches are cutting into SONET/SDH sales.'

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More information

Details of the 3Q06 results and additional analysis are published by Ovum-RHK's Optical Networking advisory services. For further details please contact Nino Elia, Senior Customer Relationship Manager, at +44 20 7551 9021, prteam@ovum.com

Ovum-RHK's Optical Networking services combine consistent quarterly analysis and annual forecasts with ongoing commentary and analysis of the global and regional aggregation, bandwidth management, WDM, and Ethernet transport equipment markets.

About Ovum-RHK

Ovum-RHK provides market research advisory services to telecom equipment and component vendors and service providers alike. Ovum-RHK is a part of Ovum, advising on the commercial impact of technology and market changes in telecoms, with offices in London, Paris, Cologne, Boston, Melbourne, Seoul, and San José.