6/4/2007 -- While other networking categories are notching record growth rates, the optical networking segment recently suffered a reversal.

Though optical networking revenues are up nearly 25 percent year-over-year, optical revenues fell off by about 8 percent in the first quarter of this year, slipping to $3 billion.

The good news, Infonetics researchers say, is that the optical downturn is more or less expected: SONET/SDH equipment comprises about 60 percent of worldwide optical equipment sales and is steadily declining in share, while its replacement -- namely, bandwidth-rich WDM gear -- continues to increase in share.

In other words, "The optical hardware market is stable, with a pattern of steady growth in WDM and slow decline in SONET/SDH after 2007, a trend we forecast in early 2006," said Michael Howard, principal analyst at Infonetics Research, in a statement. "Many factors are driving service providers to spend on optical equipment, especially WDM equipment, including the need for more bandwidth for broadband and IP video, revenue-generating and opex-savings projects, and upgrades to metro and long haul networks. In addition, mergers and acquisitions resulting in the merging of large carrier networks need larger core capacities."

Elsewhere, Infonetics forecasts, SONET/SDH equipment sales will decline each year from 2008 to 2010, while WDM equipment sales increase during the same period. Alcatel-Lucent is the overall market leader, with 22 percent of worldwide optical market share. That's down 2 points from Q4 of last year, but still ahead of runners-up Huawei and Nortel.

Siemens, on the other hand, is the long haul ROADM market leader, with 41 percent of worldwide share, followed by Infinera and Alcatel-Lucent.

Cisco is the worldwide metro ROADM switch leader, followed closely by Fujitsu. --Stephen Swoyer