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Study: Optic niches still ready to grow

Sales of fiber-optic equipment designed for networks in metropolitan areas are expected to grow, according to a new study.

Sales of fiber-optic equipment designed for networks in metropolitan areas are expected to grow despite the overall downturn in spending by communications carriers, according to a new study.

Dataquest, the market research unit of consulting company Gartner, says the worldwide market for metro wavelength division multiplexing (WDM) hardware will reach $1.1 billion this year and $4.3 billion by 2005. WDM gear increases the capacity of fiber-optic networks by sending voice and Internet traffic as different-colored pulses of light.

As this market has matured, Dataquest said, installing the equipment has become more cost-effective for carriers.

Similarly, Dataquest predicts the worldwide optical exchange equipment market will reach $539 million in 2001 and $4 billion in 2005. This equipment generally sits at the junction points of optical networks.

The prognostications of growth are a welcome sign in the battered communications-equipment sector. Companies such as Cisco Systems, Nortel Networks and Lucent Technologies, as well as smaller competitors including ONI Systems, Redback Networks, Sycamore Networks, Ciena and dozens of other rivals, have seen their fortunes dip in the past year.

The slowing economy and slimmer-than-ever profit margins have combined to put a crimp in carriers' willingness to spend money on network upgrades. This communications food-chain effect has hampered the hardware makers, forcing many of them to announce layoffs and massive quarterly financial losses.

Through it all, however, many analysts and industry experts have hypothesized that the fiber-optic equipment market is likely to bounce back. The increased use of the Internet and growing corporate data needs will demand greater network capacity, which new fiber-optic systems can deliver. Various analyst houses have put out a wide range of predictions for optical-equipment niches.

Another sign of good news for the sector came Tuesday in a new report by communications research company RHK, which forecast that the market for voice-over-broadband gear will grow to $646 million by 2004.

Voice-over-broadband equipment, manufactured by companies such as Jetstream Communications, TollBridge Technologies and others, uses high-speed Internet connections to deliver digital telephone service.