Ovum RHK: Optical components market fell in 1Q07, but growth ahead

JUNE 20, 2007 -- Ovum RHK says its preliminary analysis of first-quarter 2007 results for optical component (OC) vendors shows that revenues for the segment were down 4 percent versus 4Q06 and up 8 percent versus the year-ago quarter.

The analysis concluded:

1Q07 revenues were $980 million.

Most OC vendors attributed the revenue decline to customer-based inventory and manufacturing initiatives.

Market leader JDSU recorded a 3 percent sequential sales decline and lost market share on a rolling 4Q basis.

Finisar, the second largest OC company, posted sales of $88 million for the quarter, a 10 percent sequential decline and the second largest drop among the top ten vendors. Finisar cited inventory correction for 4-Gbit/sec Fibre Channel transceivers and the impact of just-in-time manufacturing initiatives by two of its customers as contributing factors.

Bookham experienced the weakest quarter-on-quarter performance among the top ten vendors. The company had pre-warned of weak sales to Nortel, its largest customer, and also suffered from inventory corrections.

Opnext, the fourth largest OC company, posted the strongest results with a 6 percent gain over the previous quarter. Growth came from components supporting 10 Gbits/sec and above, which account for over 80 percent of Opnext's quarterly revenues.

Optium, the tenth largest OC company, posted the greatest year-over-year growth (109 percent) with revenues of $35 million for the quarter. While its margins were hurt due to softness in demand for 300-pin MSA transponders, the strong year-over-year advance was due in part to XFP transceiver sales and revenues for introducing its ROADM product.

Components and modules supporting 10 Gbits/sec, 40 Gbits/sec, and ROADMs were identified most often by vendors. New products are being introduced and strong market growth is expected.

"All other segments of the optical communications market are expanding, and we do not see any signs of a slowdown," said Daryl Inniss, vice president and practice Leader, communication components at Ovum RHK. "We see optical component suppliers' revenue decline as a consequence of supporting customer-driven initiatives, and the effects are largely over. We expect the market to expand throughout the rest of 2007."

Source: Ovum RHK