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Optical Networking Market Rebound Forecast
Jul 2003
PROVIDENCE, R.I., July 24 -- The optical-networking equipment market (SONET, SDH, DWDM, DXC and OXC) will decline another 6 percent in 2003 before rebounding slightly in 2004, according to KMI Research. That market declined 53 percent in 2002, to $10.1 billion, following a 29 percent decline in market value from 2000 to 2001.

"Products within the optical-networking equipment mix will have widely varied results. The big losers in the 2003 market will be traditional SONET and SDH and cross-connects," said KMI analyst Michael Arden. "Most categories in 2004 will grow, with DWDM and optical cross-connects having some strong upward shifts. Next-generation SONET and SDH will continue to build on its momentum since being introduced in 1999."

The 2002 numbers reflect changes in regional activity and growing momentum in metro and other short-distance equipment deployments, resulting in market-share shifts in some categories, KMI said. North America and Western Europe were hit particularly hard by the telecom collapse, while China and Korea have helped to lessen the impact in the Asia-Pacific region. As a result, some domestic-focused companies in Asia, like Huawei, saw some categories of equipment sales grow from 2001 to 2002, bucking the contraction trend suffered by most other equipment vendors.

"In addition to the regional and distance trends that have emerged, the uptake in next-gen SONET and SDH versus traditional transmission system technology continues," according to the report. "Although SONET and SDH markets continue to decline, the next-generation segment has bucked trends and managed to see some growth."

The optical networking market will grow from $10.1 billion in 2002 to nearly $12 billion in 2007, KMI said. This rebound will be at a growth rate well below those experienced in the years leading up to 2000. More cautious spending by carriers, slower bandwidth demand growth, strategies to maximize existing networks, mergers and acquisitions of carriers, price erosion and the availability of inexpensive divested assets will temper the rebound in optical-networking equipment, according to the report.

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