UK: Ovum RHK announced its preliminary quarterly results for global optical equipment networking vendors. The global optical networking (ON) market reached a new post-2001 high of $4.4 billion in 4Q07, for a 16 percent sequential and 30 percent year-over-year gain.

"The blockbuster results for 4Q07, led by Alcatel-Lucent's and Huawei's never-before-seen $1 billion and $800 million revenue postings, respectively, pushed annual spending to $15 billion, which is $300 million over our optimistic expectation," remarks Ovum's VP Optical Networking, Dana Cooperson.

While numbers cannot be finalized until ZTE reports its numbers in late March, trends we have been seeing/discussing over the past several quarters -- shifting competitive dynamics due to vendor consolidation; growth in spending across all next-gen product segments that far exceeds declines in legacy gear; and growth in undersea builds -- continued through the end of the year.

Spending on next-gen multi-service SDH/SONET gear rose to a new post-bubble high of nearly $1.9 billion for the quarter, propelled by huge sequential spending increases in Asia-Pacific and CALA, versus a new high of $0.9 billion for metro DWDM.

"Contrary to popular myth that has Ethernet delivering a swift and decisive death blow to SDH/SONET, a range of applications will continue to exist for SONET/SDH-based devices in evolving networks, particularly as the products themselves evolve to allow more efficient switching, aggregation, and transport of data-based traffic," says Cooperson. "But WDM gear is likewise evolving to be more data friendly and is increasingly claiming the metro core from SDH/SONET as it dominated the backbone 10 years ago."

Regional highlights:
Spending in EMEA topped all other regions with just over $1.5 billion for the quarter and $5 billion for the year. "We'll be looking at the extent to which currency played a part, but there's still a ton of real growth in that 35 percent gain over 2006," explains Cooperson. "We expect our subregional analysis to show emerging markets had a largely positive effect on full-year results, and to further identify pockets of highest growth in the market."

Next-gen SDH/SONET spending grew half as much in North America as in EMEA, which made all the difference between the regions. Still, spending in North America was up 19 percent for the year, as DWDM and core switch spending and projected spending growth remain hot.

In Asia-Pacific, the market remains mixed. While ZTE results are not finalized yet, the Asia-Pac region was up at least 10 percent for the year, despite continued slow sales in Japan. Cooperson says, "It appears that once again, China and RoAP are pulling their weight against a continued sluggish Japanese market."

CALA spending growth continues to outstrip other, larger regions. "It is a smaller base," says Cooperson, "but 44 percent growth in 2007 from 2006 to just over $900 million is nothing to dismiss." Both mobile and broadband traffic growth are driving wireline builds, and vendors report continued growth ahead.

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