Tellabs’ broadband division had a terrible year, but local incumbent carriers are still spending on its core business of optical solutions, which boost network capacity without the need for extra fiber. As the surplus fiber installed during the TMT boom gets used up, this technology will become still more important. Tellabs might do well to focus more tightly on this business.
Tellabs has announced Q4 revenues of $470 million, propped up by optical networking sales.
US telecoms equipment maker Tellabs has announced its Q4 results. Its revenues were up to $470 million, but losses reached to $80 million. The technology sector has been suffering from the economic downturn and customers are spending less. But the company remains positive, saying there are now signs of stability in the US.
Tellabs’ sales of optical networking products were up 15% on last year, reaching $267 million in Q4. The company says that new optical networking products generated 7% of its total revenue. Although 2001 was a terrible year for alternative telecoms providers in the US, local incumbent carriers kept spending on optical solutions, driving most of the increase.
The bursting of the US broadband Internet bubble forced many providers to fold, which hit Tellabs’ other major revenue stream – the broadband network infrastructure market – hard. While this sector has now stabilized, the bubble is over and the infrastructure is in place, limiting growth opportunities.
Optical switching technology is more interesting, offering the possibility for service providers to increase their networks’ capacity, intelligence and flexibility without having to add more physical fiber. Uptake of such optical solutions has been relatively slow, partly because carriers believe they are using ‘best-of-breed’ equipment and refuse to admit otherwise. Another historical problem has been that optical solutions overlap with companies’ traditional ‘voice’ and ‘data’ divisions. But these issues are becoming less serious.
A recent obstacle has also been the amount of fiber connecting some routes is far more than needed, following over-expansion during the frenzy of the dotcom boom. Even so (as any Internet user will testify), data traffic growth is increasing the pressure on many long haul and metro networks.
Although the next year looks set to be steady rather than high-growth for the networking industry, Tellabs has been through the worst. The demand for next-generation optical equipment will continue to increase in the next few years, so Tellabs would do well to focus its efforts in this growing market.