Between 10% and 20% of ADVA's metropolitan optical business is Ethernet. ADVA is also negatively affected by a slowdown in spending on storage-area networking, according to a recent credit report.
"Enterprise customers in both the U.S. and Europe appear to be delaying the deployment of large storage projects that would require the use of [dense wave division multiplexing] Fibre Channel, a key focus of ADVA's enterprise business," the report stated.
Service providers are also cutting back deployments because of tight cappital markets that contributed to widespread failures in the competitive local exchange carrier ranks. This has prompted LuxN to concentrate development on lower-cost optical devices that generate a quick return on investment (ROI), according to Imregh.
"The customer always has the option to just do nothing," Imregh says. "Two years ago the industry chased the hottest start-up carrier. That's not as meaningful as it used to be anymore. Wall Street is now rewarding good ROI on specific markets."
Imregh says LuxN is insulated a little better than some of its competitors from the rough economy because the company focuses sales on service providers that have and are making money. Conversely, service providers also want to deal with established suppliers, says Nan Chen, director of product marketing at Atrica.
"The slowdown in the market means [service providers] are choosing to invest in only those companies that they believe are implementing the right technologies and who have the right team in place to be successful," Chen says. "When times are good, there is not as much incentive to look for ways to reduce costs. Because optical Ethernet technology offers a compelling cost advantage, we are seeing many of the pro-viders actually accelerate their [spending and buildout] efforts, particularly the incumbents."
CIMI's Nolle says this air of optimism is "crap" and warns that metropolitan Ethernet vendors are only fooling themselves.
"It's going to get much worse for these companies," he says. "Major service providers know that ATM works, and it goes back to the issue of what kind of equipment is on the customer premises. I bet that if you took a sample of say, the Fortune 500 companies, you wouldn't find a single buyer of Ethernet metro service."
