Below are some research updates from Rod Hall, Analyst at JP Morgan:
Commentary on the size and growth of the optical markets (Long Haul, DCI and Metro):
Q4 LH and Metro markets materially better than our forecasts: Q4 Long Haul (LH) optical revenues at $1,339m were 8.9% above our estimate and Metro Optical revenues at $1,644m were 7.7% above our estimate. In addition, Multiservice revenues at $550m were 2.8% better than our forecast and Optical switching revenues at $90m were 5.6% ahead. Overall optical market revenues at $3,622m were 7.3% above our forecast driven by strength across all segments.
Commentary on the LH portion and who grew the most - note these share percentages represent the worldwide market.
LH meaningful share gain for INFN, some for CIEN, but share loss for ERIC: Infinera gained 80bps share Y/Y to 13.8%, while Ciena gained 20bps Y/Y to 13.9%. Huawei’s share grew 50bps Y/Y to 30.6%, while ALU (+Nokia) share remained flat Y/Y at 21.4%. Ericsson, however, lost 2pp of share Y/Y to 0.7%. [Kevin: Infinera keeps taking more share in this market and at the clip they are going they are poised to pass Ciena as soon as next quarter]
Commentary on the DCI portion and who grew the most worldwide:
DCI is about a $1.2bn market: According to Dell ‘Oro, Data Center Interconnect (DCI in LH+Metro) revenue grew 21% Y/Y in 2015 to $1.2bn.
Infinera’s share for 2015 was ~15%, which suggests an uptick from Q4’14- Q3’15 combined share of 13%. Ciena’s share for 2015 was 22% vs. Q4’14- Q3’15 combined share of 24%. [Kevin: Infinera’s share went up 2%, Ciena’s share went down 2%]
Commentary on the Metro portion and who grew the most worldwide:
100G Growth Unabated. Total 100G wavelengths in LH grew by ~1.47x Y/Y to 26.7K in Q4’15, with the growth rate increasing from 1.38x in Q3’15. In the metro market, as of Q4’15 100G ports accounted for 4.9% of total metro ports (Q3’15: 4.5%, Q2’15: 3.5%). We continue to believe strong growth is likely in both the US and EMEA 100G Metro markets in 2016.
Metro: INFN keeps share, Ciena loses a little: In the metro optical market, Infinera (+Transmode) kept share unchanged Y/Y at 2.6%. Ciena lost a tiny 0.2pp Y/Y and ALU (+Nokia) lost 0.4pp Y/Y, while Huawei gained 2.7pp of share Y/Y to 27.3%. [Kevin: Nice to see Infinera holding their own while Ciena, ALU and contract some. Keep in mind their share is tiny right now - they’re just getting started]
I feel really good about the share gains Infinera took last year and the trajectory they are on. I can’t wait to see where they will be by this time next year.
Best,
–Kevin