Waiting for what's next

Listening to vendor CEOs this week, its tough to get a clear picture of where carriers are in their long-heralded evolution to next-generation packet-based networks. No one questions the inevitability of that migration, but varying testimony from vendors leaves plenty of uncertainty about the pace of this march and which equipment vendors are most directly in its path.

Lucent announced a less-than-stellar quarter this week, blaming a revenue decline on North American carriers cutting spending on traditional circuit-switched gear. In the short term, those cuts shouldn't necessarily be bad news for Lucent if it is, as it claims, poised to convert its embedded base into next-generation gear. In vowing to unveil a next-gen edge device this summer, is Lucent behind the curve or pouncing on it?

"The big losers in the 2003 market will be traditional SONET and SDH and cross-connects," KMI analyst Michael Arden wrote last summer. "Digital cross-connects...will lose market value over the 2002 to 2007 period." But nine months later, it is precisely those old, plain-vanilla cross-connects that Tellabs has to thank for the jump in revenue it reported this week (see story below). Analysts are nervously watching for traction in Tellabs' new next-gen gear, but the company's new CEO, Krish Prabhu, seemed to cast doubt on the next-gen transport sector in comments to analysts today (see below).

Are tight budgets merely slowing the pace of packet technology or are carriers still clinging to their circuits? And in either case, how long will it take before optical equipment vendors begin thanking next-generation technology in their earnings reports? The answer depends on whom you talk to, even in the same week.

E-mail me at egubbins@primediabusiness.com.