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We continue to develop and enhance our Optical Networks portfolio, including by:
We also continue to invest in core technologies, such as efficient service adaptation, aggregation, switching and management, that enable our
customers worldwide to deploy innovative optical networking services which we believe will lead the networking transformation towards high
performance packet-based networks.
Markets
We are a leading provider of optical networking products to service providers and enterprises around the world. Compared to the last few
years, the global optical market has stabilized. Service providers remain focused on maximizing return on invested capital by increasing their
capacity utilization rates and the efficiency of their existing networks. Some service providers have delayed the deployment of next generation
products. However, there remain opportunities to deliver new technologies and services that enable service providers to offer additional
revenue-generating services. We also expect that enterprises will continue to generate demand for optical networking solutions that enable
them to operate their networks more efficiently.
The outlook for optical equipment sales may be further impacted by service providers preferring to lease excess network capacity from others
or purchase assets from other operators rather than making capital investments in their own networks. We expect that any additional capital
spending by our customers will continue to be directed toward opportunities that enhance customer performance, generate revenue and reduce
costs in the near term. However, as service providers begin to more effectively utilize and eventually exceed their network capacity, we expect
that they may incrementally enhance that capacity. The timing and impact of these developments remain difficult to predict.
The market for our Optical Networks solutions is global. In the United States and Canada, new networks are not currently being built by
service providers in anticipation of market demand, but are instead being built to more closely align with actual end-user demand. Several
service providers in the United States have announced plans to deploy optical fiber networks to allow access to these networks by residential
end-users. Within EMEA, the building of pan-European optical networks by service providers is now mature and many service providers have
begun to focus on building their metropolitan and regional optical networks. We expect that the increased usage of broadband wireless data
provided by 3G networks may eventually drive the increased deployment of optical networks. The demand for additional and enhanced
services by enterprises is increasing in Europe and may also encourage service providers to invest in the creation of networks that offer
services such as optical Ethernet and storage connectivity. In EMEA, European government-sponsored service providers and networking
equipment suppliers enjoy favorable positions within many European countries.
In the Asia Pacific region, the industry is continuing to develop and may provide a significant market for new optical networking equipment
over the next several years. As a result, there has been an increased focus on the Asia Pacific region by virtually all suppliers of optical
networking equipment. Similar to what is occurring in Europe within the EMEA region, the Asia Pacific region may experience increased
demand for additional and enhanced services by enterprises which may encourage service providers to invest in the creation of networks that
offer services such as optical Ethernet and storage connectivity. In CALA, where a few service providers account for a significant percentage
of the industry, the building of national optical network infrastructures is largely complete.
Customers
Our Optical Networks business is primarily focused on offering our optical networking solutions to service providers around the world. The
service provider customers for our optical networking products include local and long-distance telephone companies, cable operators, Internet
service providers and other communications service providers. We are currently focused on increasing our market presence with key service
provider customers worldwide, which we expect to account for a substantial proportion of service provider optical capital spending.
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• enhancing our optical Ethernet portfolio by introducing new Ethernet switching and transport capabilities designed to improve the
productivity of our enterprise customers and the services offered by our service provider customers;
• introducing in 2004, a new common photonic layer product that simplifies and automates the deployment and operation of medium
and long-haul optical links;
• introducing the second release of our high density optical switching system to provide additional customer applications; and
• investing in improving the density, capacity and flexibility of our optical long-haul transmission systems.