Optical gear market shrinks 18 percent

In a sign that a telecom recovery is a long way off, the market for optical gear declined 18 percent in the first quarter, according to a study released Wednesday.

Market research firm the Dell'Oro Group said that sales in the optical market, which includes most land-based equipment that sends signals over fiber optic networks, measured $2.38 billion for the first quarter of 2002, down from $2.92 billion in the fourth quarter of 2001.

"We don't expect a recovery this year of any sort," said Shin Umeda, a principle analyst at Dell'Oro, who added that the market will probably slip further. "We'll probably see downward pressure this year followed by flat growth next year on a quarter-to-quarter basis."

Nortel Networks managed to gain the most market share in the first quarter, controlling 16.4 percent of revenue. Lucent Technologies finished second at 15.4 percent, while Alcatel rounded out the top three with 12.5 percent market share.

In the previous quarter, Alcatel captured 20.7 percent of the market revenue during the fourth quarter followed by Nortel's 14.8 percent and Lucent's 14 percent.

Despite tepid optimism from Cisco Systems on its recent third-quarter earnings conference call, Umeda believes that the telecom carriers control the fate of the gear makers.

Analysts recently cut bond ratings for WorldCom and Qwest Communications International, two established telecom carriers, to junk status. The actions follow a string of bankruptcies by less established carriers such as Global Crossing, McLeodUSA, Williams Communications and Metromedia Fiber Network.

"From the standpoint of the equipment makers, their sales are in the hands of service providers, many of whom are having difficulties," Umeda said.