An industry observer might ask a Nokia executive about its plans for 400G and there is a good chance that the response is more likely to be a general one reflecting a lot of uncertainty over what major moves to make in the optical marketplace. The commodity-like atmosphere affects other large vendors in the space as well with limited opportunities to differentiate with value-added software in the vast majority of the business. Yet, given its roots, culture, and organization, Nokia is uniquely searching for options that are likely beyond its reach or may just not turn out to be that attractive for future growth.
Some of Nokia’s loss of market position has been self-inflicted. During Verizon’s unprecedented push with GPON, the supplier was the dominant force. With NG-PON2, it appears that the vendor may not even get a seat at the table for Verizon’s next big push, which like the previous effort, and despite rhetoric to the contrary, is about serving big enterprises (see fibeReality’s post from about 15 days ago, “Verizon Switching Its Residential Landline Subscribers to Wireless”). In fairness, Nokia is working long hours to come through with a solution that has the necessary specifications demanded by the carrier. Although we still wonder whether the apparent bias by Verizon against Nokia, rational or not, would have been at least somewhat of an obstacle even if the system house had met the fundamental requirements earlier.
While Nokia supposedly has its eye on making further penetration into the Data Center Interconnect (DCI) space, it is highly probable that it will not come out with products that are more attractive in time to grab significantly more market share. Actually, this result may actually be beneficial given that our expectations on the market becoming lousy have turned out to be true with the promise of less than optimal margins generated with both the nature of the competition and of the customers. (It is interesting to note that we may have finally heard a relatively good justification for open line systems in that it does not make that much difference just to sell the piece-parts when there would be little money to be made on the full systems anyway.)
On the long-haul side, the evident loss of business at Verizon was obviously not a favorable development, but again, at least it had nothing to do with the optical operation itself. Also, at this point, we are unware of any changes that have caused Nokia no longer to be a powerhouse in the submarine sector. In addition, across the board, the company is likely to retain at least a reasonable share of the European market given its historic strength in that region.
In whatever limited way 400G makes its way into the long-haul infrastructure in the foreseeable future, as there will be plenty of room for 100G and DWDM for a long time, Nokia should be expected to be a significant player. Perhaps whenever 400-gig becomes a substantial force, “Alcatel-Lucent” will be liberated from Nokia by then, which will make life easier than being constrained to whatever extent by a corporation that clearly dislikes optics.
In whatever new direction the optical group moves, once more, as in the case of other big optical system players, internal development of technology will be a critical factor. When it is all said and done, these systems integrators have become componentry shops.
Please find details on our new report, Clash of Optical Component Vendors & Technologies in Data Center Networks.
[written by Mark Lutkowitz]