ADVA Optical Networking posted a downturn in second quarter 2017 financial results, and cautioned “exciting and turbulent times” were ahead for the industry.
The German-based firm reported an 8 percent year-over-year dip in quarterly revenues to $167.7 million, while net income plunged nearly 54 percent to $5.2 million for its latest quarter.
ADVA Optical’s stock price took a hit on the news, dropping more than 17 percent on the Frankfurt Stock Exchange.
In describing the company’s performance, ADVA Optical CEO Brian Protiva mixed positive spin with a cautious tone. Protiva said growing demand for cloud and mobile services was “driving demand for more bandwidth.” This was countered by warnings on growing pricing pressure, “fierce competition,” and the need for market consolidation.
The Americas region remained the dominant revenue driver for the company during the quarter, though it did warn of third quarter slowing due to “weaker demand from our leading [Internet content provider].”
Need to Consolidate
“Only via a fast and efficient integration of MRV Communications will we be able to stabilize revenues close to last year’s level,” warned ADVA CFO Uli Dopfer. “Owing to the weakened revenue development and the expected takeover of MRV Communications, we will be revising our cost structures and cut back on operating costs.”
ADVA said the deal will boost its optical, Ethernet, and software portfolio, and increase its reach into “non-European regions.”
“There can be no question that this acquisition will present many new business opportunities, especially for communication service providers who are seeking to explore the possibilities of virtualized network services,” Dopfer said.
ADVA has been active in bolstering its optical networking and virtualization platforms. The company last year purchased Overture Networks, which included carrier Ethernet and network functions virtualization (NFV) products, and led to the launch of the Ensemble NFV platform. Verizon earlier this year selected ADVA’s Ensemble NFV technology to run the telecom giant’s white box universal customer premises equipment (uCPE).
However, ADVA noted uptake for the Ensemble product line was slower than expected due to challenges in support of NFV rollouts.
ADVA last month updated its optical transport product targeted at metro fiber deployments. The updates included increased support for software-defined networking (SDN) and synchronization of 5G technologies.
Ovum ranked ADVA Optical as the market share leader last year in both the metro Internet content provider (ICP), carrier-neutral collocation provider (CNP) data center interconnect (DCI), and enterprise DCI markets.
ACG Research predicts the optical data center interconnect market will grow from $13.6 billion in sales last year, to $17.3 billion in sales by 2021. The research firm cited Verizon as driving the North American metro optical market from a downturn in 2016, to an area of growth this year.