Earnings reports this month are separating the old from the new and the tired from the energetic in networking equipment markets.
Sonus Networks surged, Tellium purred, and Riverstone Networks cruised as they released their spring financial numbers last week.
If a company has a product that saves customers cash, and isnt bogged down by inventory, debt, legacy equipment or an overcrowded space, it can still make a lot of money. And several companies did just that, riding consumers and businesses still-insatiable appetites for bandwidth and high-speed Internet access.
"The market isnt waiting for the next big thing to spur spending. Its just in the midst of a cycle it needs to get through — and caught in the capital-spending crunch," said Sterling Perrin, an IDC analyst.
Among the bright spots ahead: AT&T said it expects its IP traffic to grow 300 percent annually. As a buyer, AT&T is expected to be a big driver of equipment purchasing.
Among those expecting huge losses this quarter were big legacy vendors saddled with debt from vendor-financed deals gone sour.
But newer Sonus Networks reported revenue up 27 percent from the previous quarter, and its six-month sales figures showed an increase of some 1,300 percent from a year ago, although it ended with a net loss. "Were giving carriers what they need now — lower-cost switching equipment and the ability to increase their revenues by implementing new packet-based technologies," said Steve Nill, chief financial officer of Sonus.
"Its younger, innovative companies like Sonus and Tellium that are going to win," said Harry Carr, CEO of optical switch maker Tellium, which doubled its revenue. "Were where innovation is coming."
The largest carriers are holding back on spending to coax steep discounts from equipment vendors, but also to take a good look at the new generation of optical equipment and access gear. The newer equipment piles more functions into each product, and provisions services without truck rolls, reducing costs, said Michael Howard, co-founder of Infonetics Research.
"CTOs [chief technology officers] are thinking that when theyre assessed next year, if they spend a lot of money now on old-generation equipment, they wont look very smart," Howard said. "Theyll look smarter if they have the forward vision of taking on this compelling new equipment that lowers operating expenses."
The deals the major carriers are beginning to close have placed Ciena, ONI Systems, Sonus, Unisphere Networks and even troubled Sycamore Networks in relatively good positions, Howard said.
But even the strongest local exchange carriers are taking time to make spending decisions, and that could prove fatal to dozens of metro startups that need to make revenue quickly to survive, said Marian Stasney, a Yankee Group analyst. Still, Extreme Networks, LuxN and a few others are doing well because they have technology that solves problems right now, she said.