LightTrends

 

Vectors 2019: Takeaways from Ciena's Recent Customer/Technology Showcase

 

LightCounting Releases a Research Note on Vectors 2019

 

Every eighteen months or so, Ciena hosts more than 150 companies and 800 or so customers at its Kanata (a suburb of Ottawa, Canada) campus at an event it calls Vectors. The purpose is to give customers (and industry analysts) advance looks at products and technology in development and get their feedback. Although much of what is disclosed at Vectors is under NDA, with Ciena’s permission we published a seven-page Research Note about the company’s strategy and products today.
Ciena CFO Jim Moylan gave a high-level intro to Ciena’s corporate strategy, which starts with a vision that the company “will be the best at moving bits and the best at automating networks.” The strategy to achieve that vision has three elements:

  • Be the leader in technology and innovation
  • Diversify in segments, solutions, and geographies
  • Achieve global scale

Mr. Moylan also elaborated on Ciena’s financial strategy, saying “Ciena’s financial strategy is not complicated. We just grow revenues faster than operating costs”. And Ciena has done that. In an industry whose revenues have grown just 3-4 percent per year, Ciena’s revenues have grown an average of 9% annually, by virtue of taking market share away from competitors (growing share in North America especially) and exploiting new market segments (submarine, hyper-scalers) and geographies (India).  Ciena’s announced financial goals for the next few years are to grow revenues 6-8% annually.

Ciena’s goal of 6-8% annual revenue growth appears conservative given that Ciena’s actual annual growth since 2012 ranged from 6-14% with a CAGR of 10%. In recent years, Ciena has developed an admirable track record of beating its own annual revenue guidance, so the outlook could just be more of the same. However, it’s also possible that Ciena is factoring in a slowing in its share gains or other market headwinds. For example, the transition to automated networks could be a very slow process which would affect revenue growth from software sales. Open source software may put a dent into this new pool of revenue also.

Ciena CTO Steve Alexander described how the company’s Adaptive Network vision translates into a technology strategy, listing several key customer needs that are guiding Ciena’s technology focus. First among these is the need to ‘make capacity and connectivity abundant’ to support continued bandwidth growth and growing numbers of devices and network endpoints. From a technology standpoint, this translates into pushing coherent optical closer to the network edge, and a continued focus on miniaturization of the optical transport components. WaveLogic 5 Extreme and WaveLogic 5 Nano are just the latest publicly announced new products along this path. And yes, Ciena confirmed that WaveLogic 6 is in development, without saying when it would hit the market or with what speed and performance. Mr. Alexander later confirmed that he believes on-board optics will eventually be needed, but that it remained a topic of debate among his team as to when. 

The second key customer need is to have the network edge closer to the cloud (i.e., content) to improve customer experience. This means adopting datacenter-like architectures and networking principles in metro and even access networks and driving end-to-end latency down to 10 milliseconds or less. Since most latency in today’s networks is due to transit time through various network elements and not fiber length, simplifying and consolidating network elements is key to attaining this goal. 

The third critical need cited by Alexander is to mitigate network complexity in order to avoid being overwhelmed by the growth in scale required for future networks. Ciena’s solution for mitigating complexity is advanced automation in both Ciena-only and multivendor hardware domains.

The fourth need, to have safer networks, translates into enhanced security features, and greater network resistance and resilience.

One of the most interesting and relevant demos we were privy to addressed the next-gen WaveLogic 5 product family – consisting of the WaveLogic 5 Extreme (WL5e) and WaveLogic 5 Nano (WL5n).

Ciena shared many details of the WL5e ASIC and electro-optic components performance and production which we can’t disclose, but suffice to say, we were impressed. Additionally, Ciena recently announced that its first public customer for WL5e-equipped Waveserver equipment is Internet2, which connects several hundred universities, government agencies, and community anchor institutions across the U.S.  (see https://bit.ly/2MNxmC0)

The clients-only Research Note published today provides additional detail on the above and includes additional content on:

  • Ciena’s WaveLogic 5 Nano pluggable coherent optical transceivers
  • A coherent transport solution for cable MSOs using Ciena’s 5170/5171 transport boxes
  • Ciena’s strategy to provide Adaptive Networks via its Manage, Control and Plan (MCP) and Blue Planet software suites
  • Thoughts on the impact of the trade war and Cisco’s acquisition of Acacia on Ciena
  • An brief update on Ciena’s vertical integration efforts

 


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Interested in meeting with LightCounting at these upcoming industry events? Email us today to schedule a meeting with our team. View our recently published reports and 2019 Research Roadmap.