Metro Optical Networking: Where's the Action?

Transcription

1 Metro Optical Networking: Where's the Action? Ron Kline Sr. Analyst, North American Optical Transport May 1, 2002 w w w. r h k. c o m

2 No, We re Not Talking About... Good bankruptcy lawyers Network liquidators Grey market equipment stockpiles Paper shredder suppliers 2

3 Executive Summary: The Best of Times, the Worst of Times Metro spending shifting away from Legacy Metro WDM and OEDs make up the difference Good near-term opportunities. Lots of RFx activity for next-gen products Year-year growth returns to NA in % 80% 60% 40% 20% 0% Source: RHK, Inc. Split of Metro ON Spending Metro OCS Metro DCS Metro WDM Metro OED Metro SONET Plenty of opportunity for vendors, service providers, investors Source: RHK, Inc. 3

4 Agenda RHK s Optical Transport programs 2001 snapshot Where are the bright spots in 2002? Hot product areas Industry activity Where are the dim spots in 2002? 2003 outlook? Recommendations Summary 4

5 What do RHK s Optical Transport Programs Offer? Global coverage of optical networking Market share and forecast, analysis, and recommendations Metro North America Product coverage: Aggregation, Bandwidth Managers, WDM Market segments: ILECs, CLECs, IXCs, INDs Long Haul North America Asia Pacific Europe 5

6 2001 Snapshot: Five Vendors Dominate, SONET is King Metro ON down 41 percent from 2000 levels ($8B) SONET and DCS represent the bulk of the spending Five Tier-1 vendors Fujitsu, Tellabs, Nortel, Alcatel, Lucent controlled 85 percent of the NA metro market SONET the single largest market at $2.4B (58 percent of total) DCS was $1.4B (28 percent) Nascent WDM market grew to $690M (14 percent) Source: RHK, Inc Metro ON Market ($5B) 3 Tier 2 11% 20 + Tier 3 4% 5 Tier 1 85% 6

7 Why these Vendors Rule: In NA metro ILECs spend the money 1. Fujitsu 1st in SONET, incumbent position in all RBOCs 2. Tellabs 1 st in DCS, new to WDM and SONET markets 3. Nortel 2 nd in SONET, 1st in metro DWDM 4. Alcatel 2 nd in DCS, moderate SONET sales; late to market with WDM 5. Lucent Competes in all markets, 3 rd in SONET; close relations with incumbents 7

8 Where the Bright Spots Are: Product Areas Optical edge devices (OEDs) Service providers want more capacity and scalability, smaller footprint, less power, and better data features than legacy Products must be SONET at their core! Metro WDM Driven by localized fiber shortages and new services Opportunity for products with low start-up costs, strong network management support, data services support Optical core switches (OCSs) The foundation of intelligent ONs, growing Service providers inching toward dynamic, intelligent optical networks. Example: AT&T with Ciena and Cisco Large capacities are driving down switching costs 8

9 Where the Bright Spots Are : Industry Activity Partnerships of great companies, technologies to create stronger vendors, e.g., Acquisitions: ONI by Ciena Astral Point by Alcatel Ocular by Tellabs OEMs: ADVA FSP products by Fujitsu White Rock VLX products by Tellabs Service providers looking for next-gen transport, aggregation, and bandwidth management have lots of choices RFI/RFP/RFQ activity is very strong Hardware gives the speed, scalability, and density; software the brains Technologies on horizon: 40G, 10G Ethernet, tunables, R-OADMs, switch fabrics 9

10 Where are the Dim Spots? (The Tough Markets) CAPEX crunch: Metro service providers have pulled in the reins Down ~10 percent for 2002 Hard for non-incumbents to break in, sales mainly for cards WDM: Slow to take off still a tough prove-in Fiber relief Private enterprise networks Photonic switching: Not mature enough Technical problems Limited applications in metro 10

11 2003 Outlook? Legacy DCSs and SDH/SONET ADMs continue their decline All NA next-gen markets return to positive growth Metro WDM and OEDs begin ramp STS-1 OCS deployments pick up Cable and utilities as vendor opportunities? 11

12 Recommendations: How to Weather the ON Storm Vendors: Follow the money: Use global organizations to target growth markets worldwide for near-term revenue Conserve cash: Spend R&D money wisely, but don't sacrifice the future by gutting next-gen product development Build relationships: Answer RFPs for longer-term opportunities in NA metro WDM, OEDs, and OCS Service providers: Use the time to search out the best products at the best prices Push vendors to work together to create de facto standards Investors: Don t give up on the market! Optical is the networking answer Use the slowdown to seek out the best of the best Bargains abound, there s time for due diligence, and there are plenty of folks willing and able to partner 12

13 Summary Pockets of growth everywhere OCS, OED, metro WDM Lots of RFx activity for next-gen products Good time to acquire or partner with companies to shore up product lines, diversify across ON Year-year growth returns to NA in 2003 Plenty of opportunity for vendors, service providers and investors who can go the distance 13

14 Thank You! Ron Kline telephone: (650) RHK, Inc. All rights reserved worldwide. This is a proprietary document. Any use of this document must be in strict adherence with the Service Agreement between RHK Inc. and you, the subscribing corporation, as an authorized recipient. Use is restricted solely to the Work Group of the subscribing corporation as described in your Service Agreement. Information herein is subject to change without notice. RHK Inc. assumes no responsibility or liability for any use of, or reliance on, the information herein. INFORMATION IS PROVIDED "AS IS" AND DOES NOT CONSTITUTE AN OFFER OR WARRANTY WITH RESPECT TO THE MATERIALS DESCRIBED HEREIN. RHK INC. SPECIFICALLY DISCLAIMS ALL WARRANTIES WITH RESPECT TO THE INFORMATION (AND PRODUCTS) DESCRIBED HEREIN, WHETHER EXPRESS, IMPLIED, OR STATUTORY, INCLUDING WITHOUT LIMITATION THE IMPLIED WARRANTIES OF MERCHANTABILITY, NONINFRINGEMENT, AND FITNESS FOR A PARTICULAR PURPOSE. Nothing herein shall be construed as granting any right or license, whether express or implied, under the intellectual property rights of RHK Inc. No part of this document may be reproduced or transmitted in any form without the written consent of RHK Inc. w w w. r h k. c o m