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Ciena Can Get Away With 400G Puffery

March, 2018

Ingrained in the “Nortel” legacy in high-end optics at Ciena is the obsession to jump to the next bit rate as soon as possible, at a minimum from a marketing perspective. In the distant past, the Canadian company leapfrogged to OC-48/STM-16, which led to an unusually short life in the overall marketplace for OC-12/STM-4. Later at least partially spurred on by MCI, which made the mistake of jumping to bleeding-edge technology too soon in deploying dispersion-shifted fiber, which favored TDM over DWDM solutions, Nortel became the dominant player in OC-192/ STM-64. Of course, when it came to higher rates, Nortel was the first to market with coherent 100G, and had a big lead technologically early in the game. However, even after it became part of Ciena, there was a reluctance to talk about the huge number of lower rate, 40G ports being shipped on the 6500. So, it is no surprise that Ciena is prematurely pushing the idea that 400G is right around the corner. Being solidly positioned in the market like never before as an optical transport vendor in general, and particularly in comparison to smaller system players, it can afford to sacrifice some credibility without really suffering any penalties.

Ciena is playing a similar game as it did earlier on its lower speeds when 40G was 100G-capable. On the last earnings call, its CEO, Gary Smith, said: “400 gig, I know it's becoming more and more important. I don't have a breakdown of it in terms of contribution to revenue, because what we’re shipping are effectively programmable.”

We also believe that Smith is being somewhat disingenuous when he says that “…400G…is beginning to change the unit of currency for capacity in our customer’s networks today, and it seems to be in contradiction to what the supplier stated about a year and a half ago.” As far as we are concerned, there can be no doubt that the “unit of currency” will remain at 100G for an extremely long time.

Every optics component supplier and system house are compelled to have a 400G story or they will not remain viable. However, the most reasonable, optimistic time frame by candid executives (especially at those vendors catering to the hyperscale data center operators with 400-gig) is that everything technically will not come together in under two years.

One would certainly not get that impression in walking around the OFC 2018 show floor or in listening to the vast majority of industry analysts, who theoretically should be the most objective, but who have discovered a long time ago that it is their best financial interests to push the most optimistic scenarios imaginable. They will also not necessarily stop at just 400G.

The hype on 400-gig has been going strong for at least a few years. In April 2015, there was our “400GbE Spectacular Fantasy” and in October of that year we wrote, the “More 400G Insanity at ECOC” article. Recently, we published: “Finisar/Oclaro: Nearsighted Beyond 4x50G.”

At the 2018 OIDA Executive Forum, the keynote speaker acknowledged to us that the use of 400GbE will be focused on the hyperscale players, which means in many cases there will be no impact on the public network, especially with Google and Microsoft, which fully own their internal networks worldwide. When it came to 100G wavelengths, early on, there was a much higher level of confidence in leasing them to financial institutions or very large enterprises, such as pharmaceutical firms.

Shifting back to Ciena, it is really hard to foresee at this time the use of 400G at all in the terrestrial long-haul network by public operators. When it comes to potential metro DWDM applications in which the distance limitations are not as much of a factor, we accurately predicted that 100G in this portion of the network would be a long process because of the limited number of client-side interfaces at that data rate. As we stated above, finding them at the 400G rate will be even closer to a search for a needle in a haystack.

In order to get a more convincing outlook from a vendor, see what ADVA Optical Networking is saying, a vendor supplying the hyperscale operators as well as traditional ISPs. With the exception of a short-term aberration, ADVA has a solid reputation for sincerity ever since its establishment.

As always fibeReality does not recommend any securities, and this writer does not invest in any companies being analyzed by us.

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[written by Mark Lutkowitz] 

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  • Mark  
    April 24, 2018 at 10:02 AM Reply
    For additional commentary on this article, please see: https://www.linkedin.com/pulse/ciena-can-get-away-400g-puffery-mark-lutkowitz/