Fiberoptics Industry Report

June 1, 2002

by Hassaun A. Jones-Bey

Electronicast sees signs of recoverySigns of a modest recovery in the consumption rate of fiberoptic communication components have begun to appear, according to comments by Jeff Montgomery, chairman and founder of Electronicast (San Mateo, CA) during the annual Electronicast Conference in Monterey, CA, last month. The disastrous gap between shipments and consumption started to close in 2001 as the excess fiberoptic component inventory was drawn down by consumption, and a lot of what remains is no longer usable, Montgomery said. So the current moderately growing demand must be met by production of new components. The national economy seems to be recovering, but Montgomery said strong growth would only return to the fiberoptic component industry with resumption of growth and build-out of the fiberoptic networks. That resumption will happen as investment capital moves back into network support, and Montgomery estimated that investment would begin to pick up again within six to nine months.RHK says recovery will be slowWireline service-provider capital expenditure in North America will decline from $77 billion in 2001 to $46 to $51 billion in 2002, according to a new report from RHK (South San Francisco, CA) entitled, "North American Telecom is in for a Slow Recovery." Capital expenditure will be flat through 2003 as service providers continue to trim capital expenditure in an attempt to return to positive cash flow. Service-provider capital expenditure is expected to experience its first pulse of growth in 2004. "Despite indications that the general economy is recovering, we don't anticipate an increase in telecom capex next year," said Melanie Swan, director of RHK's Telecom Economics Program. "All indicators point toward service providers returning to health in late 2003, but still no noticeable increase in overall capex until 2004. While traffic growth remains strong, average long-haul trunk-capacity utilization is just 35% and service providers have found numerous means to extract additional capacity from existing networks. IP traffic is forecasted to growth 100% in 2002. This tells us service providers have little immediate need to spend much on new network infrastructure."Lockheed Martin selects Tellium for optical switchingTellium (Oceanport, NJ) has announced a multiyear, multimillion dollar agreement with Lockheed Martin Corp. (Bethesda, MD), in which Lockheed Martin has agreed to purchase Tellium's Aurora and StarNet products in support of a U.S. government communications network. Terms of the agreement were not disclosed. Lockheed Martin's Management and Data Systems division will begin testing Tellium's Aurora wavelength optical switches for deployment in the second quarter of 2002. The agreement also includes a multiyear maintenance provision whereby Tellium will provide Lockheed Martin with ongoing technical support of its optical switches. "Lockheed Martin approached us with a highly specialized application, and we were pleased that our products met their specific customized needs," said Harry Carr, Tellium chairman and CEO.Lucent to provide Verizon with DWDM optical equipment Lucent Technologies (Murray Hill, NJ) announced a three-year agreement with Verizon (New York, NY) to expand the capacity of Verizon's regional interoffice core network throughout the United States. Verizon has named Lucent its exclusive provider for future deployments of ring dense wavelength-division-multiplexing (DWDM) technology. Lucent will provide Verizon with its metropolis enhanced optical networking, an optical system designed to eliminate bottlenecks in metropolitan networks caused by increasing data traffic needs of its customers. This ring-based optical-networking solution allows Verizon to expand the bandwidth of its existing network and cost-effectively deliver new revenue-generating, high-speed services such as Gigabit Ethernet and interoperable storage solutions to its customers. Verizon's network deployment will begin in Philadelphia later this spring, as a first office application with future rollouts targeted at large data market areas throughout the United States.Also in the news . . Alcatel Optronics (Paris, France), reported first-quarter results with sales down by 77.5% to €35.1 million (US$31.9 million) over the same period last year. Loss from operations was registered at €43.0 million (US$39.1 million). On a sequential basis, sales for the first quarter declined by 50%. . . . Alcatel has also formed a partnership with Multilink Technology (Somerset, NJ) to jointly develop next-generation transceivers. . . . Tellium (Oceanport, NJ) reported revenues for the first quarter ended March 31 of $54.1 million, compared with $15.6 million for the same period last year, or an increase of $38.5 million.

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