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Debasement of Optical Market Research

October, 2018

In 1982, as a pre-law student at NYU, I walked into the office of employment leads at the university to see what jobs would be available over the summer. A consulting company downtown, called Northern Business Information (NBI), was looking for somebody who was as researcher and writer, and I said to myself that job was for me. I remained with the company for four years, becoming educated about telecom technology, figuring out corporate strategies, and other useful skills, and started its transmission research business, just as optics was starting to take off in the industry. Some of the most vital aspects of my experience at NBI included appreciating the extraordinary importance of doing independent, primary research as well as developing a healthy skepticism for any public statements made by equipment suppliers. As 2018 comes to a close, I have tried over the years to do my best to uphold the principles established by my first employer in providing a balanced view on the performance of vendors, and to offer a realistic outlook on future technology trends. Like any other person, I am not infallible, and even would be embarrassed to look at some projections, especially early in my career, in which I got carried away with the hype at the time. Yet, I strived to take advantage of those mistakes as lessons moving forward. Unfortunately, for a very long time, it seems that the vast majority of market research analysts in the optical space have not demonstrated they are far out on the learning curve, despite being in the business for many years. Too much of their information is derived from endless dog-and-pony shows at the big conferences or through other public relations efforts of the manufacturers. In fact, I have said many times they often act as if they are extensions of the PR departments of these vendors, effectively being cheerleaders for the marketplace, rather than objective consultants.

If a supplier provides data or information to a research firm, it needs to be properly vetted through additional intelligence gathering, especially by talking to contacts at customers, who are in the best position to provide unbiased feedback. fibeReality has been told that one prominent firm will just run with any arbitrary number representing the total sales given by a particular company. When it comes to projections, the largest research firms are apt to be in lockstep with each other, with the primary concern internally being whether they are high enough, as opposed to in so many cases, the real timing of just the introduction of a new solution needs to be adequately examined.

We have provided examples in the past in which the sheer lack of intimacy with optics technology, with historic market trends, and just with basic networking concepts are nothing short of shocking. In many cases, it can only be described as laziness in not making the effort to talk with a sufficient number of honest engineers. How else does one explain a recent projection, which was bullish on 400G, but bearish on 100G, despite the latter data rate still in the early stages of becoming the new currency?

There are no humiliating credibility problems for these research firms because they are adequately rewarded with regular sales of reports and packages. They are also amply patted on the back by the firms, supplying optics, for doing a good job in mainly spewing up whatever is provided in a public manner. They would also be incredibly surprised by the disparaging remarks made by these customers about their capabilities in private.

Certainly not to sound holier than thou, or to even think about coming across in any kind of saintly manner, but true analysts know they are doing their job, when the criticism comes directly. I have had executives angrily make boldface lies about their performance to my face, especially those who had responsibility to spin analysts, and discovered it would not work on me. One time, an exec, from a trade association, who apparently did not like some of our contrarian views (and also appeared to be drunk at the time) came up to me, and accused fibeReality of offering “fake news.”

My fervent wish is that at some time in the future, there becomes once again, a clear separation between PR and dispassionate analysis in the optical market. I am not optimistic. It is certainly not in the interests of the vendors, and it has been my experience that many of these consultants in our space do not want to rock the boat potentially affecting their incomes, lack the necessary intellectual curiosity, or simply do not want to work that hard.

I would like to thank my wonderful mentors at NBI, who made my career possible by patiently helping me to become a proper market analyst: Sean White, Francis McInerney, John Celentano, and Bill Ambrose.

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

To follow us on our totally separate, quick update company blog, which is exclusively on fibeReality’s LinkedIn page, please click here.

[written by Mark Lutkowitz]

 

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  • brian kinn  
    November 02, 2018 at 00:04 AM Reply
    Well stated, Mark. It is rare to find a knowledgeable source that isn't just trying to "get it done" on company "boilerplate". I've been investing for 25+ yrs in this sector, and I find your analyses to be critically invaluable. Frankly, your blog is not only refreshing, but stands in stark contrast to vast tonnage of the hyperbole from the "street".