Optical networking component vendors feel squeeze

Corrections in inventory by customers have led to a second quarter on quarter decline in the sales of optical componenets for networking equipment, new figures suggest.

According to figures released by research outfit Ovum RHK, the sector's sales declined by five per cent in the second quarter to $936 million (£468 million). Company revenues were also down one per cent compared to the second quarter of last year.

Ovum said that market leader JDSU posted a 12 per cent sequential sales decline and managed to lose market share on a rolling fourth quarter basis. Its rival Finisar, had strong quarter-on-quarter growth and gained nine per cent of the market with revenues of $96 million (£48 million).

Opnext, the number four company in the sector had the strongest growth in the quarter, up 68 per cent and this said Ovum was down to sales of componenets supporting 10 and 40 Gbit/sec Ethernet products. This accounted for over 80 per cent of the company's revenues.

But according to analysts the contraction is a temporary phenomenon.

"Equipment vendors in all segments are reporting strong revenue gains," said Daryl Inniss, vice president and practice leader, Communication Components at Ovum RHK. "Optical component suppliers' revenues are declining as a consequence of customer-driven inventory initiatives that are largely over, but we are surprised at the length and depth of the impact on component vendors."

Inniss said that although he expect the market to resume steady growth in the second half of this year, "pockets of inventory correction may continue to have a negative impact".

Ovum said that components and modules supporting faster Ethernet technologies were identified by vendors as driving increased sales and new products are being introduced and strong market growth is now expected.

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