Ciena says that as more of its carrier and web scale company customers implement 400G optical solutions to support growing traffic levels, the ongoing shift from current 100G and 200G platforms is picking up pace.
Gary Smith, CEO of Ciena, told investors during the company’s fiscal first quarter 2018 earnings call that more of its service providers are implementing 400G optical in their network builds to accommodate current and future traffic demands.
“I would say 200G is kind of in our rear-view mirror,” Smith said during the earnings call, according to a Seeking Alpha earnings transcript. “400 gig is becoming more and more important. I don't have a breakdown of it in terms of contribution to revenue because what we’re shipping is effectively programmable.”
Evidence of 400G adoption was seen throughout the vendor’s quarter as it won 7 new customers for its 400G-capable WaveLogic Ai platform, bringing it to 17 customers to date.
Smith said Ciena is seeing growing interest for 400G in several Asia Pacific markets.
“We are seeing this capacity trend play out with global Tier 1 service providers, notably in Asia Pacific, where a key contributor to our Q1 growth in the region was revenue from our recent wins in Japan and Korea, in addition to continued strength in India,” Smith said.
Ciena is also seeing interest for 400G from domestic U.S. providers like Verizon.
In January, Verizon announced that it completed its latest 400G field trial delivering Ethernet traffic on one wavelength between MPLS core routers over its packet optical network. This test traffic was transmitted between two Juniper Networks PTX5000 routers across the Ciena 6500 Packet-Optical Platform, both used in Verizon’s production network.
“This capacity trend also encompasses the metro builds we’ve discussed, including a strong contribution from the Verizon metro network project in Q1, which is rolling out exactly as expected,” Smith said.
100G migration continues
Despite the growing potential for 400G, Ciena said continues to see 100G platform adoption while enabling its customers to migrate to 200G and 400G as needed.
“We still sell a ton of 100 gig,” Smith said. “We haven't stopped selling 100 gig, but we’re first in the market with 100, 200, and now 400, and we'll continue to be a leader in innovation.”
But the use of higher speed platforms will be used for specific applications at various network distances.
“We expect that 200G will begin to replace many 100G long-haul connections over time, while 300G can now be deployed for 1000km distances, and 400G for shorter reach distances,” Smith said.
Industry analysts have forecast growing momentum for 100G and 400G coherent systems.
According to a recent Cignal AI optical forecast, 100G and 400G coherent will be widely adopted at the edge of the network by the end of 2021. Additionally, the research firm said estimates that 400G technology will account for nearly one-quarter of all deployed WDM bandwidth in 2020.
Ciena itself continues to see the movement from 100G to 400G happening faster than what took place in the previous migration from 40G to 100G.
“There’s been a faster rate of adoption as we went through 40 to 100 to 200, and now 400,” Smith said. “We're early days on 400 gig, but the early rates of adoptions are high, driven in part mostly by global carrier networks (GCN).”
Packet optical, software dominate revenues
During the quarter, the main contributors to Ciena’s revenues were a rise in converged packet optical equipment and its emerging Blue Planet software platforms as more carriers migrate towards an SDN and NFV construct in their networks.
Here’s a breakdown of Ciena’s key quarterly metrics:
Networking platforms: Ciena reported total networking platform revenues of $496 million, up from $490 million in the same period a year ago. Converged Packet Optical was again a star performer in the Networking platform segment with $427.4 million in revenue while packet networking declined to $68.6 million.
Software and software-related services: Total segment revenues were $53.5 million, up year-over-year from $39.3 million. Within this segment, software platforms saw the largest growth with $29.6 million in revenues, while software-related services rose slightly to $23.9 million.
Global Services: Total global services revenues were $96.6 million, with a strong performance from maintenance support and training, which had $56 million in revenues. Meanwhile, Ciena reported $30 million and $10.6 million in installation and deployment and consulting and network design revenues.
Financials: For the fiscal first quarter 2018, Ciena reported revenue of $646.1 million as compared to $621.5 million for the fiscal first quarter 2017.