Global optical networking (ON (News - Alert)) equipment spending continued to decline for the third consecutive quarter in 2012 versus 2011, according to the technology analyst and research firm Ovum (News - Alert). As per Ovum’s study, operators in troubled economies are running networks to capacity in an effort to delay network projects and defer spending. Although, the research firm expects marginal increase in the fourth quarter, the overall market performance means growth over 2012 will remain flat.
In a new market share analysis, the global analyst firm reveals that the ON market continues to contract, and vendors with strong exposure to weaker North America and EMEA markets are cutting costs and restructuring operations to ride out the current economic storm. According to Ovum, global spending in the quarter dropped 1 percent compared with Q311 to $3.7 billion. However, the study indicates that spending is up 14 percent in Asia-Pacific compared with Q311, but not enough to offset declines of 11 percent in North America, 8 percent in EMEA and 4 percent in South and Central America.
“Preliminary analysis of 3Q12 results offers little positive news,” says Ron Kline, principal analyst network infrastructure, Ovum. “The competitive environment is challenging at the moment. Many vendors are grateful just to see their business stay flat. It will be very difficult for the market to reach the 2 percent growth we have predicted for the year. Now is the time to position next-generation products with operators which will have no choice but to turn spending back on in 2013.”
As per Ovum’s analysis, the economic decline will continue for the rest of the year and into 2013 at the very least. However, it could get potentially worse should the U.S. government let its economy fall off the “fiscal cliff.”
Regarding vendor performance, the study shows that Ericsson, Fiberhome, Huawei and NEC (News - Alert) were the only top vendors to post both sequential and year-over-year revenue growth. While Nokia Siemens, Tellabs and ZTE posted sequential and year-over-year revenue declines, and Alcatel-Lucent’s (News - Alert) quarterly revenue fell below $400 million for the first time.
Based on the lackluster performance of last three quarters, the technology analyst is predicting that the global market will likely contract into the $14.5–15 billion range.
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Edited by Rachel Ramsey