Service Provider Technology
By Stephanie Gibbons 21 Feb 2019
Too many suppliers have supported the optical components (OC) industry for far too long. Ovum's market share analysis tracks more than 40 suppliers, which for a market worth less than $9bn per year, is excessive. Recent consolidation is a bright sign, but more is needed.
On November 9, 2018, II-VI announced its intention to acquire Finisar. Finisar has been the OC market leader for more than nine years now, currently holding about 13% of the market. II-VI has about 5% of the market and is in seventh position over a rolling four-quarter period. Together they will rank number one and command 18% of the market. The combined company's next largest competitor will be the recently merged Lumentum-Oclaro with 13% of the market. We believe the Lumentum-Oclaro merger was probably the impetus for II-VI's move. The transaction is being partially financed by Bank of America Merrill Lynch with II-VI assuming a debt of $2.0bn. It will be interesting to see how quickly this debt can be paid off. Finisar shareholders will own approximately 31% of the combined company.
This consolidation will cause some concerns for clients. II-VI is one of the largest independent producers of vertical-cavity surface-emitting lasers (VCSELs). Finisar makes its own VCSELs, so how will these product lines be rationalized? Will they remain separate or be combined into one product, and are they equivalent in both cost and technology? Apple is one of Finisar's largest customers for VCSELs. They reached a deal in December 2017 for a $390m pre-payment for VCSELs used in Apple's Face ID system, locking out other smartphone companies from this technology. We expect this relationship to continue, at least for the time being.
We believe there are more advantages than concerns with this union. Finisar gains II-VI's expertise in semiconductors and telecom transmission, and II-VI moves up the OC value chain with Finisar's leadership in transceivers and transmission technology.
Perhaps the most compelling reason for the acquisition is to combine the two company's R&D efforts. In particular, II-VI cites "optimization of R&D, capital, and asset utilization" to achieve faster time to market. Not only will the combined companies be able to cover OCs used in communications networks, but they will also be able to expand into adjacent markets such as green energy and smart grid. 3D sensing products will cover all of these vertical markets.
Ovum is encouraged by the recent M&A activity within the OC industry. It will help the entire market to become healthier. But with the market share leader only commanding 18% of a market with upwards of 30 competitors, additional consolidation is still needed.
Market Share Spreadsheet & Analysis: 2Q18 Optical Components, SPT003-000022 (September 2018)
Lisa Huff, Principal Analyst, Optical Components
Service Provider Technology
By Daryl Schoolar 07 May 2019
The first standards-based 5G networks have gone live with commercial service offerings. The reviews, however, have been less than flattering. A web search of reviews shows such common themes as patchy coverage, speeds are fast but not 10 times faster than LTE, the device has a hard time holding onto the 5G signal, and few devices are available.
Service Provider Technology, Enterprise Decision Maker
By Chantel Cary 21 Sep 2018
Telecoms technology vendor ZTEsoft has rebranded as Whale Cloud following investment from Alibaba Group. Leveraging Alibaba's cloud and AI capabilities, Whale Cloud has launched d-BEP, a cloud-native BSS product.
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