I think your statement may be a bit of a stretch. Does it really matter what NT or LU say? How about what the carriers are saying? WCOM, Williams, T, and FON are all saying the same thing. Cap-ex will be slowing next year. Those are 4 big names all speaking in unison. And that goes along with all the CLECs who may not just be slowing, but reallllllly slowing. Circuit-switched gear has been slowing for a year. Hence, the lingering LU problems. I think what all the carriers are saying is just what they are saying, cap-ex will be slowing. I don't think any of them explicitly stated that IP and optical will be excluded from the slowdown. Maybe I'm wrong about this, but I don't think so.
Let me refer you to the most recent RHK report on optical systems. I can't post the graph, so will explain what it says.
In 1998 the over-all optical systems market was $10 billion. Of that Sonet and SDH made up over 3/4 and WDM less than 1/4. In 1999 the market grew to around $15 billion with WDM picking up share only slightly. By 2000 the ratio will be $23Billion with a 2/3-1/3 split. By 2001 the market should reach around $33billion, with SDH flat and WDM/Optical-switching only slightly lower than Sonet. In 2002 the story changes. The market will reach $43 billion and SDH and Sonet will be nearly flat, and WDM/Op-switching equal to Sonet for the first time. By 2003 the total market is estimated to reach over $50 billion with WDM/op-switching surpassing Sonet and SDH combined.
From JPMorgan's Communications Semiconductor report, dated October 20, 2000:
Where Are We in the Optical Deployment Cycle?
We believe that we are only in the first inning of what should be an extra inning ballgame for deploying high-speed routers and optical networks. To date, high-speed optical networks have really only been deployed in U.S. long-distance networks and submarine networks, applying the technology for simple bandwidth expansion on installed fiber. We have yet to really tap into more advanced uses of optics, such as wavelength services, which will allow carriers to deploy bandwidth on a wavelength by wavelength basis. Maybe even more basic, we have not yet tapped into the metro market, which promises to be a significant growth opportunity as access pipes continue to open up to businesses and consumers. We also haven't tapped most other major regions of the world, including Europe (just beginning), most parts of Asia, and the rest of the globe. Again, for all of the hype we have seen in the market, we still believe that we are in the very early days of growth. >>>>>
Now, I honestly don't know if you're right about systems vendors stock-piling components while in the process of testing them, but when industry reports say optical systems will grow from $23 billion in 2000 to over $50 billion in 2003, I have to believe there will be a powerful lot of components fueling that growth. And when companies like JDSU and SDLI announce they're expanding capacity to meet those demands by factors of 4X and 5X, I figure they're doing so for a reason.
Another factor to keep in mind when you hear carrier spending is slowing: optical gear costs less than Sonet/SDH. This from the LightReading article on the MSDW optical networking report:
Because of cheaper deployment costs and service capabilities, optical equipment generally pays for itself in a relatively short amount of time. For example, Morgan Stanley estimates that ultralong-haul gear costs anywhere from $30 to $45 million compared to the $200 to $220 million it costs for Sonet transport gear. Some metro equipment can pay for itself in as little as three months, according to the report.
So even if carrier spending in absolute dollars tapers off, the amount they spend on optical networking will increase for quite some time.
I'll let someone else argue the foreward-indicator points. I find it hard to imagine components are a lagging indicator, but I'll leave it to someone else to explain.
Pat |
