Ovum says that sales in China and Europe fell sequentially “more than is typical,” leading Huawei and Alcatel-Lucent to post their worst global quarterly revenues since the third-quarter of 2007 and 2005, respectively.
Adding to the gloomy report on the Chinese and European markets, Ovum says that sales also underperformed versus this period last year across all regions, with North America the "least bad" - down eight percent, the smallest percentage in the last three quarters - and EMEA performing the worst, down 15 percent, the largest percentage in nearly two years.
However, despite the drops in sales, Ovum is still forecasting a modest four percent growth in the ON market this year to $16.2 billion.
According to Ovum’s network infrastructure practice leader, Dana Cooperson, the preliminary results for the first quarter this year indicate more a “cause for concern than a cause for panic,” and she says, while 1Q sales are typically lower than 4Q sales, “actual spending last year overshot our $14.9 billion forecast when results in Asia-Pacific and Europe were less negative than we predicted.”
One explanation Ovum gives for this year’s first quarter poor result in the global ON market is that the weakness expected in late 2011 is happening now, predominantly due to continued macroeconomic and political challenges in Europe. “Also 4Q/1Q market seasonality is becoming more pronounced as spending and spending growth shifts to Asia-Pacific and South & Central America (SCA), in which case sales should rebound more than is typical in 2Q12,” Cooperson observes.
On vendor performance, Ovum reports that NEC benefited in the first quarter from strong sales in its home market, rising 0.4 share points, with its quarterly wavelength-division multiplexing (WDM) sales the strongest ever seen. In addition, Ovum says that Cisco pointed to strong year-over-year revenue growth in North America, Asia-Pacific (specifically Japan), and SCA, while Huawei's revenues “may have tumbled sequentially, its Yoyo results beating the quarterly market average globally and in EMEA, and thus it picked up share.”
In the network core, Cooperson says that more vendors than in the past included data centre interconnect as a key driver of growth for their business and for use of 100G, control plane, and encryption features. “However, mobile backhaul remains a ubiquitous growth driver at the network edge, with vendors noting the increasing speed of evolution from SONET/SDH to Ethernet/MPLS for aggregation and transport. As 100G deployments grow, 40G deployments are holding steady,” Cooperson concludes.