Companies cash in on new fiber-optic technology

The networking industry is rushing to tap the trend for networks based on fiber-optic technology.

4 min read
When Ciena chief executive Patrick Nettles first unveiled his company's high-speed networking technology to the market, he was in a unique position.

A participant at the annual Optical Fiber Communications industry conference in Baltimore in the mid-1990s, Ciena then proved it was ahead of the industry with technology that could get more juice out of networks.

Now, the company is only one of a number of firms rushing to tap the trend Ciena stock chart for networks based on fiber-optic technology, highlighted at this week's trade show in Baltimore. Using fiber installed underground, telecommunications companies and their equipment suppliers are building high-speed networks that transmit voice and data across vast distances using "wavelengths," or beams of light.

"What we're talking about is a whole new way of transmitting information," said Jeremy Duke, an analyst with market watcher Synergy Research.

The fiber-optic trend has taken hold across a wide expanse of the networking industry, on Wall Street, and at this year's booming trade show in Baltimore. Companies as diverse as Ciena, Agilent Technologies and new entrants such as Sycamore Networks and Redback Networks are all reaping the benefits of an insatiable appetite for bandwidth.

"It reflects the energy, excitement and scale that's occurred in the intervening years," according to Nettles. "Optical networking is a big business that's going to get a lot bigger."

To understand the impact optical technology is having on the communications industry, one has to look no further than Wall Street. On news of a new optical strategy yesterday, Agilent--a Hewlett-Packard spinoff--jumped $52 to hit a new 54-week high.

Viewed by many as a networking afterthought after a series of strategic missteps, Ciena is another firm that has been reinvigorated by the optical networking boom, as shares have hit new highs on increased equipment sales.

Price has changed the market considerably. Fiber-optic technology is now Agilent stock chart affordable, allowing communications firms to launch large building projects for networks that cover metropolitan areas and high-rise business complexes. Additionally, technological innovations in the optical industry now allow increased amounts of traffic to be shuttled through vast networks at even higher speeds.

The innovation has come at a time when bandwidth is needed more than ever because of the exploding use of the Internet.

"The only way to contain this beast seems to be through the use of fiber-optic technologies," a recent FAC/Equities report on the communications landscape said.

Most analysts estimate that the demand for network capacity will continue to triple every year for the next several years, and that the market for optical-based networking equipment will reach more than $15 billion by 2003 in North America alone.

Optical-based networking equipment feeds communications carriers like Qwest Communications International, Global Crossing, MCI WorldCom and others that continue to build out their networks to meet demand.

To meet demand, other equipment providers are getting into the mix. Cisco, the dominant provider of gear for data traffic, recently acquired $10 billion worth of optical technology to go after telecommunications carriers and yesterday announced a $280 million contract with an emerging communications provider, Cogent Communications.

Nortel Networks and Alcatel, two established players among carriers, announced capacity upgrades to their optical technology. Nortel also revealed a $60 million pact with the FiberNet Telecom Group to use the company's metropolitan area optical equipment. Recently acquired Nortel subsidiary Qtera also said GTE Internetworking will test its long-haul fiber-optic gear.

Redback is expected to provide further details concerning how it will integrate optical technology from its recent acquisition of Siara Systems this week.

Lucent, another veteran optical player, said it would expand its production capacity 60 percent this year to meet demand, following similar moves by Nortel.

Start-ups, such as Siara, Qtera, Sycamore Networks and Xros, also continue to get into the act. Sunnyvale, Calif.-based Xros announced new technology that essentially switches beams of light carrying information innovation the company says provides the industry with a "different way of building optical networks," according to Rajiv Ramaswami, vice president of systems architecture for Xros.

Chelmsford, Mass.-based Astral Point Communications also revealed new technology this week, set for trials this week with Advanced TeleCom Group as part of a commitment to purchase up to $25 million in gear from Astral Point. The company is building technology for metropolitan networks that includes a "self-healing" mechanism so optical networks won't crash.

Chromatis Networks, another metro entrant, also launched its own equipment to compete with the likes of Astral Point and Nortel.

All of these upstarts are taking advantage of the interest in optical technology, with cash from venture investors being "poured like a fire hose" into developing firms, according to Synergy's Duke.