OFC 2007 Exec Forum - Ten Things You Missed

Here’s a top 10 list of my most notable observations from the Executive Forum at the Optical Fiber Conference in Anaheim last Monday.

1. When the Carrier panelists (Verizon, AT&T, BT) spoke of SONET/SDH they used the past tense. “When we used to build a SONET/SDH ring”. They appear to have subconsciously moved on.
2. According to Ryan Limaye from Goldman Sachs, Sanford Bernstein issued a report analyzing what would happen to the Telcos if they became a dumb pipe. The result? Much smaller but more financially efficient companies with a better return on equity. All of the carriers with the exception of British Telecom were not open to the idea of being a dumb pipe.
3. Observation: Equipment guys are asking for 40Gb/s components, and component vendors are giving them the finger. The fact that component vendors no longer allow equipment vendors to outsource R&D with a low ROI is a very positive development for this business. People are finally saying no.
4. 40Gb/s demand pressure is from carriers who deployed the Cisco CRS-1 router and need something to hook it up to. Stephen Carlton from Fujitsu kicks in that 40G muxponders make up the other 50% of demand. Many speculate 40G will be bypassed altogether in favor of 100Gb/s Ethernet using new modulation schemes.
5. Jerry Rawls from Finisar (FNSR) - “It is impossible to deliver the level of R&D expected by customers given current margin levels”. “Custom Tweaked Requirements are hard coded into the Telecom psyche and may be impossible to remove”.
6. Fariba Danesh from Avago (private) - ”Finisar pricing is making things difficult for us” (I didn’t get a precise quote… but this definitely was the jist).
7. Jo Major from Avanex (AVNX) - “Huawei still tends to buy at the component level.” Som