Optical Outlook Cloudy

Industry researchers lowered their expectations for the optical networking industry in late 2008, taking into account the deteriorating economy.

Dell'Oro predicted a nearly 10% decline in the optical transport equipment market in 2009, following some 20 consecutive quarters of growth after the turn-of-the-century telecom bubble burst.

Ovum now expects the global optical networking market to shrink 5% in 2009 to $15.4 billion, after growing 8% this year. Last June, Ovum had predicted the market would grow 20% this year and 11% in 2009 to more than $20 billion.

Starting in 2010, the optical sector should start to grow again, Ovum said, projecting a six-year stretch of 8% compound annual growth, bringing the market to more than $23 billion in 2013.

This year, however, Ovum expects North America, Europe, the Middle East and Africa to be hit the hardest. Ovum believes aggregation gear will see the biggest declines, including single-wavelength multiservice provisioning platforms. Bandwidth management gear, including traditional and optical crossconnects, should also struggle, the firm said. Metro WDM gear should see the smallest decline. And sales of submarine systems actually should grow next year — good news for components vendors because WDM and submarine gear require more components than other types of optical products.

One of the few vendors growing market share of late in the optical space, according to Dell'Oro, is Huawei Technologies. It is rumored to have bid on Nortel Networks' metro Ethernet networks unit, which gets most of its revenue from optical transport.

Not everyone is so pessimistic. In December, the same month Dell'Oro and Ovum reduced their outlooks, Infonetics Research predicted “minimal impact” on optical from the larger economic malaise, forecasting continued growth in optical network hardware to reach $16.4 billion in revenue by 2011.