GARTNER DATAQUEST IDENTIFIES SOME OF THE GROWTH SEGMENTS IN VOLATILE OPTICAL NETWORKING EQUIPMENT MARKET.

As the networking industry prepares for the emergence of broadband, the metro wavelength division multiplexing (WDM) transmission systems and optical exchange equipment (OXE) market are positioned for strong growth through 2005, according to Dataquest Inc., a unit of Gartner, Inc. (NYSE: IT and ITB).

Despite the downturn in the networking industry, there are segments that remain positive and will experience considerable growth. While the metro WDM and OXE segments are just now beginning to develop, these markets will experience consistent growth through 2005.

The worldwide metro WDM industry is projected to reach $1.1 billion in 2001, a 108 percent increase from 2000 revenue of $509 million. By 2005, the worldwide metro WDM market is forecast to reach $4.3 billion. Gartner Dataquest says the worldwide OXE market is on pace to reach $539 million in 2001, a 140 percent increase over 2000 revenue of $225 million. In 2005, worldwide OXE market is forecast to reach $4 billion. The OXE segment includes any type of node equipment that handles traffic within the optical layer without relying on client layers, such as SDH/SONET or IP.

"The transition from a narrowband to a broadband information society presents backbone network operators with a difficult challenge they need to upgrade their network with new equipment and an infrastructure that allows them to provide scalable bandwidth at prices that decline over time and with increasing bandwidth," said Peter Kjeldsen, industry analyst for Gartner Dataquest's worldwide Telecommunications and Networking group. "These two segments will play an important role in optical networking, as this technology will be used for providing operators with the bit-wise economy of scale that they need."

As WDM technology has matured, it has also become more cost effective. This has opened up a new market segment for metro WDM transmission systems. These systems do not necessarily have to use either the 1550-nanometer window or narrow channel spacing. The short distance requirements and cost-sensitive nature of this segment makes the success criteria different than the success criteria in the long-haul segment.

Gartner Dataquest analysts said optical networking is the key to scalable backbone networks because it provides operators with a technology that fits the requirements of a next-generation backbone network - that is, it offers the bit-wise economy of scale and price erosion that operators need.

This information is available to clients of Gartner Dataquest's Worldwide Optical Network Equipment and Components research cluster. This service provides equipment vendors, service providers and investors with strategic market information across the breadth of the optical networking market. Optical components, systems, and optical (lambda) services are analyzed at the global and regional level to provide clients a holistic understanding of the market's dynamics.

"This service provides answers to the most relevant market and technical issues that concern the optical industry," said Dean Eyers, group vice president for Gartner Dataquest's worldwide Telecommunications and Networking group. "What makes this service unique is the fact that we follow the value chain from components through services in one program, and this gives our clients a distinct advantage at a time where value is paramount."

This service is targeted at optical components manufacturers; optical switching systems vendors; traditional and emerging equipment manufacturers; ISPs; incumbent and next generation carriers implementing an optical infrastructure; and the financial community.