January 19, 2001 1:10 PM PST

Study: Optical market growth will continue to boom

A new industry study predicts that the market growth in the optical networking sector will continue to grow at a heated pace, despite today's climate of uncertainty.

According to Dell'Oro Group, the demand for faster Internet networks will cause the worldwide optical transport market to double by 2005 to $57.3 billion from $23.5 billion in 2000. The industry includes giants such as Nortel Networks, Lucent Technologies and Cisco Systems, as well as smaller players such as Ciena, ONI Systems and Sycamore Networks, among numerous others.

Most of the rapid growth will come from the equipment used to build networks in metropolitan areas.

The study flies in the face of some short-term market trends. Optical networking stocks have been hit hard amid concerns about a downturn in spending among the customers they serve: telecommunications network operators. Last year, optical networking was one of the hottest sectors on Wall Street.

Dell'Oro predicts that DWDM (Dense Wave Division Multiplexing) technology will grow to $36.5 billion in 2005 from $7.4 billion in 2000.

DWDM is the technology that allows information to be sent over fiber-optic cables in different colors and frequencies so that more data can fit into the optic pipeline. Long-haul cables, which run between cities, and metropolitan networks, which are a scaled-down version of long-haul networks, comprise the DWDM market.

The metro network market will grow at the fastest pace since it remains in its embryonic stages, according to the research. In 2000, the market stood at about $383 million, and Dell'Oro predicts that will balloon to $3.1 billion, an increase of more than 700 percent.

The larger long-haul market will grow from $7 billion to 33.4 billion, a jump of 377 percent.

Analysts also think that wireless traffic will play an important part in the growth.

"As wireless traffic becomes increasingly Internet based, it all rides on the optical backbone," said Tom Lauria, an analyst at ING Barings.

Dell'Oro also forecasts that networks driven by SONET (Synchronous Optical Network) equipment will grow, but only moderately until 2005.

The SONET market will increase from $16.1 billion to $20.8 billion, but Dell'Oro expects much of the growth to occur by 2003 as service providers move to new technology to improve the efficiency of their networks.


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