Survey Sez: Optical Vendors Deal With Spending Cuts

Spending on optical gear dropped 23 percent globally in 1Q12, when compared with 4Q11, with EMEA suffering the most, says new data from Infonetics Research.

“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,” says Andrew Schmitt, principal analyst/Optical. “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.”

He adds: “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. 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.”

Here’s what else is happening:

>> While the global WDM and SONET/SDH optical network equipment market declined 23 percent in 1Q12 to $2.8 billion (the largest quarterly drop in years), the impact was sharpened by a strong previous quarter, when the market grew 9 percent.

>> Revenue for all optical vendors declined in EMEA, with the exception of Infinera.
Though EMEA typically has a seasonal sequential decline in the first quarter, 1Q12 was the worst quarter for optical capex in more than five years.

>> Fujitsu and Ciena outperformed their competitors in North America.

>> Asia Pacific was buoyed by strong spending in Japan, with NEC and Fujitsu posting eye-popping 28-percent gains in 1Q12 from the year-ago first quarter.

>> Aside from the standout performances by NEC and Fujitsu, while many of the big vendors enjoyed gains the previous quarter, 1Q12 was characterized by such smaller companies as Infinera, ADVA and Transmode outperforming the market.

>> ROADM optical-equipment spending was flat in 1Q12, an achievement considering this category posted a record quarter in 4Q11.