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OFC 2007 Marketwatch Presentation

For those of you who missed my presentation at OFC 2007, I’ve put together an encore presentation you can watch directly on my site. I was asked to provide my opinion on the state of the optical landscape. I highlight the reasons why consolidation is necessary, why the industry isn’t 100% healthy, and the importance of commodity vs. boutique thinking.

Click through to the full post to view and comment.

One thing I didn’t mention – I am just as guilty of irrational exuberance in 2000.

Discussion

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  1. great presentation. even I , a complete optics “ignorant” was able to get a great deal of info out of it about the market and its prospects.

    btw
    you are pretty consistent about CSCO’s bad influence on the optics modules market. Although decreasing the amount of vendors and money being poured into R&D sounds good, it seems to me that the only way to deal with a monopsony is to have another one or two large module consumers like CSCO. Don’t know if it’s realistic, but possible candidates might be Huawei ( you’ve written several pieces about the huge potential in the chinese market) or JNPR who just introduced some layer 2 boxes.

    Posted by ohad | April 6, 2007, 11:09 AM
  2. That is a good point. I guess it is my bias that I see no immediate threats to Cisco’s Ethernet business. China and 10GE are two possibilities. China is the only area of the world where Cisco products are not as dominant, and Huawei/3-Com picks up the slack.

    The future module battleground is 10GE, and whether copper can supplant optics like it did at 1GE. Also, more applications like Infiniband or Fibre Channel could migrate to use ethernet-like interfaces. This would diffuse the customer base and be a healthy force.

    Posted by Andrew Schmitt | April 6, 2007, 11:59 AM
  3. Thanks for the nice presentation.
    Both Indepedent utilities and telecome suppliers went to bust after 2001. In a stark constrast, most of utilities recovered nicely after the Enron debacle, whereas optical suppliers still languish….

    Posted by yf | April 8, 2007, 9:01 AM
  4. Andrew-
    You talk about CSCO squeezing suppliers like it’s a bad thing. It’s nothing new and it happens all of the time in every industry, everywhere. It all rolls downhill and in the end, that’s supposed to be good for the consumer and deliver lower cost products. But that doesn’t seem to be occurring somewhere in the middle of this microeconomic system. CSCO keeps their prices high while their customers and suppliers continue to suffer from lower prices.

    It’s not that I don’t agree with you (I personally subscribe to the belief that CSCO is single handedly responsible for the bubble) but obviously CSCO is doing a lot of good for their customers and they have no desire (or consumer pressure) to change that situation.

    They rule. We all suffer. Everybody was ok with it when Bill Gates did it.

    Posted by DC | April 16, 2007, 8:46 AM
  5. If Cisco is doing such a great thing for their customers then why do they force them to buy modules from Cisco only? If they gave customers the choice of buying a 3rd party module that meets MSA requirements in addition to modules sourced by Cisco, they one could judge the value they deliver reselling modules.

    Having one customer be 70% of the market is a bad thing when it comes to having a free market. I don’t know how you can say otherwise. Certainly, it is a good thing to some people.

    I agree with you at the end. I’m not advocating intervention. But unlike MSFT, which is on everyone’s anti-trust radar screens, Cisco is not. My objective is to highlight this in order to catalyze change in the market.

    Posted by Andrew Schmitt | April 16, 2007, 10:25 AM
  6. But it’s an interesting comparison. CSCO and MSFT. I don’t hear too many complaints about CSCO, especially from their customers. And I don’t recall hearing too many complaints about MSFT, other than from Mac users.

    What will change in the market bring to us? Is it more profits for component vendors? Is it cheaper, more widespread optical systems? Does it translate into better service, prices, offerings, capabilities for the bandwidth consumer? Does that mean more P2P businesses or just Google getting bigger and better servers?

    Why don’t CSCO’s customers demand lower prices? I would think that they have enough individual or pooled resources to come up with an alternative (supplier, technology, system). That’s the way it all started.

    I want this change like you do. But I wonder if it has to start at the other end of the supply chain.

    Posted by DC | April 16, 2007, 11:58 AM