For the first time in almost two years, quarterly global optical networking (ON) revenues were down year-over-year (YoY), according to Ovum. Sales in China and Europe also fell sequentially more than is typical, leading Huawei and Alcatel-Lucent to post their worst global quarterly revenues since 3Q07 and 2005, respectively.
In a new market share analysis*, the global analysts found revenues declined 9% from the year-ago quarter, while annualized spending retreated by $300m, or 2% sequentially, wiping out a third of the gains of 2011. Sales also underperformed versus this period last year across all regions, with North America the "least bad" (down 8%, the smallest percentage in the last three quarters) and EMEA performing the worst (down 15%, the largest percentage in nearly two years). Yet, Ovum is still forecasting modest 4% growth this year to $16.2bn.
“Preliminary results for 1Q12 indicate more a cause for concern than a cause for panic,” says Dana Cooperson, practice leader of Ovum’s Network Infrastructure practice. “While 1Q sales are typically lower than 4Q sales, actual spending last year overshot our $14.9bn forecast when results in Asia-Pacific and Europe were less negative than we predicted.”
One explanation Ovum is giving for the poor 1Q12 result is that the weakness expected in late 2011 is happening now, predominantly due to continued macroeconomic and political challenges in Europe. “Also 4Q/1Q market seasonality is becoming more pronounced as spending and spending growth shifts to Asia-Pacific and South & Central America (SCA), in which case sales should rebound more than is typical in 2Q12,” comments Cooperson.
In terms of vendor performance, NEC benefited in 1Q12 from strong sales in its home market, rising 0.4 share points; its quarterly WDM sales were the strongest ever seen. Cisco pointed to strong year-over-year revenue growth in North America, Asia-Pacific (specifically Japan), and SCA. And while Huawei's revenues may have tumbled sequentially, its YoY results beat the quarterly market average globally and in EMEA, and thus it picked up share.
In the network core, more vendors than in the past included data center interconnect as a key driver of growth for their business and for use of 100G, control plane, and encryption features. “However, mobile backhaul remains a ubiquitous growth driver at the network edge, with vendors noting the increasing speed of evolution from SONET/SDH to Ethernet/MPLS for aggregation and transport. As 100G deployments grow, 40G deployments are holding steady,” concludes Cooperson.