Changewave Research: Corporate Telecom & Optical Equipment Purchasing

ChangeWave Research: Corporate Telecom & Optical Equipment Purchasing

ChangeWave Research Report:

Corporate Telecom & Optical Equipment Purchasing

Robust Spending Seen for Telecom Carrier and Optical Equipment

Overview

This report presents the findings of our latest ChangeWave Alliance survey on corporate spending for telecom carrier, optical and wireless equipment.The survey was conducted April 18-27, and a total of 239 members involved with or knowledgeable about telecom equipment purchases in their organization participated.

The results providereal-timebenchmarks on purchasing trends incorporate telecom and optical equipment. Future surveys willtrackchanges from these benchmarks topinpointthe companies with the greatest sales momentum.

Bottom Line: The survey results point torobustcorporate spending ontelecom carrier equipment for the next six months. One-in-two respondents (50%)who work in companies that purchase carrier equipment, say their firm intends to increase carrier equipment spending over the next six months – only 13% say spending will decrease.

The findings are equally upbeatfor optical equipment – 47%of those working in companies that buy optical equipment say their spending will increase, compared with just 11% who say it will decrease.

We also looked at wireless equipment spending, and a strong 53% project increases over the next 6 months compared to just5% who project a decrease.

Summary: Telecom Equipment Spending Next 6 Months

Telecom Carrier Equipment / Optical Equipment / Wireless Equipment
Increased Spending Next 6 Months / 50% / 47% / 53%
Decreased Spending Next 6 Months / 13% / 11% / 5%
Spending Will Remain the Same Next 6 Months / 32% / 37% / 35%
Don't Know/ No Answer / 5% / 5% / 7%

Telecom Carrier Equipment Vendors: Focusing on carrier equipment, 66%of respondents say their companybought from industry leaderCisco Systems (CSCO) over the past 6 months – withNortel (NT) (28%),Lucent (LU) (26%) and Alcatel(ALA)(22%)bunchedclosely together insecond place. Plans for the next 6 months reveal similar trends–Cisco well ahead in first place with Nortel, Alcatel, and Lucent fighting for second.

Who leads among smaller vendors? Zhone Technologies (ZHNE)(5%) was identifiedas the leadingsmall telecom equipment vendorrespondents havepurchased from over the past six months.

Optical Equipment Vendors:In terms of the optical networking market– 43% of respondents purchased from Cisco over the past 6 months, with Lucent (19%), Nortel (18%) and Alcatel (17%) in a dead heat for second.Among optical component suppliers, JDS Uniphase (JDSU)(23%) and Corning(GLW)(20%) lead the market and appear strong going forward.

We also looked at smaller vendors,and foundOptical Cable (OCCF) (5%) leading among optical components suppliers and Verilink (VRLKQ.pk) (5%) leading in optical networking.We note that on April 10, 2006, Verilink voluntarily filed for Chapter 11 reorganization.

Wireless Equipment Vendors:Motorola (MOT) (28%),Lucent (23%) andNortel(19%) rank as the top three wireless equipment vendors in terms of market share over the past 6 months – and similarly going forward. Alvarion (ALVR) (10%) ranks as the clear leader among smaller wireless equipment vendors.

Who Gains and Loses From an Alcatel/Lucent Merger? We asked respondents who they thought stood to benefit and to lose most from an Alcatel/Lucent merger. The biggest beneficiaries named were Alcatel and Lucent – no surprises here. But the clear loser is believed to be Nortel, cited by 43% as the supplier most likely to lose out from the merger.

Summary of Key Findings

The ChangeWave Alliance is a group of 7,500 highly qualified business, technology, and medical professionals in leading companies of select industries—credentialed professionals who spend their everyday lives working on the frontline of technological change. ChangeWave surveys its Alliance members on a range of business and investment research and intelligence topics, collects feedback from them electronically, and converts the information into proprietary quantitative and qualitative reports.

Helping You Profit From A Rapidly Changing World ™

Table of Contents

Summary of Key Findings...... 2

The Findings...... 4

(A) Telecom Carrier Equipment...... 4

(B)Optical Equipment...... 8

ChangeWave Research Methodology...... 15

About ChangeWave Research...... 16

I. The Findings

Introduction

Total Respondents (n=239)

Respondents Working in Companies That Purchase Telecom Carrier Equipment (n=155)

Respondents Working in Companies That Purchase Optical Equipment (n=132)

Respondents Working in Companies That Purchase Wireless Equipment (n=184)

(A) Telecom Carrier Equipment

Respondents Working in Companies That Purchase Telecom Carrier Equipment (n=155)

(1) Question Asked: Let's focus on the future. Thinking about your company's spending on telecom carrier equipment over the next 6 months – would you say your company intends to increase their spending on telecom carrier equipment, decrease their spending, or will spending on telecom carrier equipment remain the same compared to the previous 6 months?

Increased Telecom Carrier Equipment Spending Next 6 Months / 50%
Decreased Telecom Carrier Equipment Spending Next 6 Months / 13%
Spending Will Remain the Same Next 6 Months / 32%
Don't Know / 5%

Robust Telecom Carrier Equipment Spending Ahead.One-in-two respondents (50%) who work in companies that purchase carrier equipment, say their firm intends to increase carrier equipment spending over the next six months – only 13% say spending will decrease.

(2A) Question Asked: Which of the following categories of telecom equipment has your company purchased in the past 6 months? (Check All That Apply)

VoIP Equipment / 55%
Optical Equipment / 47%
Wi-Fi Equipment / 38%
3G Wireless (GSM / UMTS / WCDMA / FOMA) Equipment / 28%
3G Wireless (CDMA2000 / EV-DO / EV-DV) Equipment / 25%
WiMAX Equipment / 14%
Don't Know / 8%
Other / 3%

(2B) Question Asked: Over the next 6 months, which of the following categories of telecom equipment will your company be purchasing? (Check All That Apply)

VoIP Equipment / 51%
Optical Equipment / 44%
3G Wireless (GSM / UMTS / WCDMA / FOMA) Equipment / 28%
Wi-Fi Equipment / 26%
3G Wireless (CDMA2000 / EV-DO / EV-DV) Equipment / 19%
WiMAX Equipment / 16%
Don't Know / 10%
Other / 3%

Equipment Categories. VoIP (55%) is the top categoryof telecom equipment that companies purchased in the past six months, and they look to remain the top category over the next 6 months.

(3A) Question Asked: From which of the following telecom carrier equipment vendors did your company purchase telecom equipment (including new technologies and applications) over the past 6 months? (Check All That Apply)

Cisco / 66%
Nortel / 28%
Lucent / 26%
Alcatel / 22%
Motorola / 21%
Juniper / 12%
Nokia / 11%
JDS Uniphase / 10%
Tellabs / 10%
Ericsson / 10%
Adtran / 9%
Ciena / 8%
Alvarion / 3%
Extreme Networks / 3%
Andrew Corporation / 3%
Harris / 3%
Foundry / 3%
Arris / 2%
Harmonic / 1%
Tekelec / 1%
Don't Know/Not Applicable / 14%
Other / 14%

(3B) Question Asked: From which of the following telecom carrier equipment vendors will your company be purchasing telecom equipment (including new technologies and applications) over the next 6 months? (Check All That Apply)

Cisco / 58%
Nortel / 25%
Alcatel / 23%
Lucent / 22%
Motorola / 18%
Nokia / 12%
Juniper / 11%
Ciena / 9%
JDS Uniphase / 8%
Adtran / 8%
Tellabs / 8%
Ericsson / 7%
Alvarion / 5%
Andrew Corporation / 3%
Extreme Networks / 3%
Foundry / 3%
Arris / 1%
Harris / 1%
Harmonic / 1%
Tekelec / 1%
Don't Know/Not Applicable / 21%
Other / 6%

Telecom Carrier Equipment Vendors. Focusing on the carrier equipment market, 66% of respondents say their company bought from industry leader Cisco Systems over the past 6 months, with Nortel (28%), Lucent (26%) and Alcatel (22%) bunched closely together for second place. Plans for the next 6 months reveal similar trends – Cisco in first with Nortel, Alcatel, and Lucent fighting for second.

(4A) Question Asked: What about smaller companies? From which of the following smaller telecom carrier equipment vendors did your company purchase telecom equipment (including new technologies and applications), over the past 6 months? (Check All That Apply)

Zhone Technologies / 5%
Verilink Corporation / 4%
Metalink / 2%
Carrier Access / 2%
NMS Communications / 1%
Orckit Communications / 1%
Aware / 0%
Vyyo / 0%
Don't Know/Not Applicable / 84%
Other / 6%

(4B) Question Asked: What about smaller companies? From which of the following smaller telecom carrier equipment vendors will your company be purchasing telecom equipment (including new technologies and applications) over the next 6 months?

Verilink Corporation / 4%
Zhone Technologies / 3%
Carrier Access / 2%
Metalink / 1%
Orckit Communications / 1%
Aware / 0%
NMS Communications / 0%
Vyyo / 0%
Don't Know/Not Applicable / 83%
Other / 7%

Smaller Carrier Equipment Companies. Zhone Technologies (ZHNE)(5%) was identifiedas the leadingsmall telecom equipment that vendorrespondents have purchased from over the past six months. Looking ahead, Verilink (VRLKQ.pk) (4%) holds a slim one-point edge over Zhone for the next 6 months.We note that on April 10, 2006, Verilink voluntarily filed for Chapter 11 reorganization.

(B) Optical Equipment

Respondents Working in Companies That Purchase Optical Equipment (n=132)

(5) Question Asked: Let's focus on the future. Thinking about your company's spending on optical equipment over the next 6 months – would you say your company intends to increase their spending on optical equipment, decrease their spending, or will spending on optical equipment remain the same compared to the previous 6 months?

Increased Optical Equipment Spending Next 6 Months / 47%
Decreased Optical Equipment Spending Next 6 Months / 11%
Spending Will Remain the Same Next 6 Months / 37%
Don't Know / 5%

Strong Optical Equipment Spending. Turning to optical equipment – 47% of those working in companies that buy optical equipment say their spending will increase, compared with just 11% who say it will decrease.

(6A) Question Asked: From which of the following optical networking vendors has your company purchased optical equipment/services over the past 6 months? (Check All That Apply)

Cisco / 43%
Lucent / 19%
Nortel / 18%
Alcatel / 17%
ADC Telecommunications / 11%
Ciena / 9%
Motorola / 8%
Tellabs / 8%
Fujitsu / 7%
NEC / 2%
Ericsson / 1%
Hitachi / 1%
MasTec / 1%
Sycamore Networks / 1%
Dycom Industries / 0%
Telent / 0%
Don't Know/Not Applicable / 22%
Other / 8%

(6B) Question Asked: And over the next 6 months, from which of the following optical networking vendors will your company be purchasing optical equipment/services? (Check All That Apply)

Cisco / 41%
Lucent / 19%
Nortel / 18%
Alcatel / 16%
Ciena / 8%
Motorola / 8%
ADC Telecommunications / 7%
Fujitsu / 6%
Tellabs / 5%
Ericsson / 5%
Hitachi / 2%
NEC / 2%
Sycamore Networks / 1%
Dycom Industries / 0%
MasTec / 0%
Telent / 0%
Don't Know/Not Applicable / 29%
Other / 4%

Optical Networking Vendors. In terms of the optical networking market -- 43% of respondents purchased from Cisco over the past 6 months, with Lucent (19%), Nortel (18%) and Alcatel (17%) in a dead heat for second. Looking at the next 6 months, Cisco (41%) maintains the lead over Lucent (19%), Nortel (18%) and Alcatel (16%).

(7A) Question Asked: What about smaller companies? From which of the following smaller optical networking vendors has your company purchased optical equipment/services over the past 6 months? (Check All That Apply)

Verilink / 5%
Calix - Including Optical Solutions / 2%
Adva Optical / 1%
Don't Know/Not Applicable / 89%
Other / 2%

(7B) Question Asked: What about smaller companies? Over the next 6 months, from which of the following smaller optical networking vendors will your company be purchasing optical equipment/services? (Check All That Apply)

Verilink / 3%
Calix - Including Optical Solutions / 2%
Adva Optical / 1%
Don't Know/Not Applicable / 92%
Other / 6%

Smaller Optical Networking Companies. We also looked at smaller vendors and found Verilink (5%) holding the lead in optical networking. We note that on April 10, 2006, Verilink voluntarily filed for Chapter 11 reorganization.

(8A) Question Asked: Let's focus on Optical Component Suppliers. From which of the following Optical Component Suppliers has your company purchased optical components/products over the past 6 months? (Check All That Apply)

JDS Uniphase / 23%
Corning / 20%
PMC-Sierra / 7%
Finisar / 6%
Adaptec / 6%
MRV Communications / 5%
Tyco / 5%
Zhone Technologies / 3%
Avanex / 3%
Oplink Communications / 3%
Bookham / 2%
Optical Communication Products / 2%
Newport / 2%
Triquint Semiconductor / 2%
Furukawa / 2%
Exar / 0%
GSI Group / 0%
RBN / 0%
Don't Know/Not Applicable / 54%
Other / 8%

(8B) Question Asked: And from which of the following Optical Component Suppliers will your company be purchasing optical components/products over the next 6 months? (Check All That Apply)

JDS Uniphase / 20%
Corning / 17%
Finisar / 7%
PMC-Sierra / 6%
MRV Communications / 5%
Zhone Technologies / 5%
Tyco / 4%
Adaptec / 4%
Bookham / 3%
Newport / 2%
Optical Communication Products / 2%
Avanex / 2%
Furukawa / 2%
Triquint Semiconductor / 2%
Exar / 0%
GSI Group (Formerly Lumonics) / 0%
Oplink Communications / 0%
RBN / 0%
Don't Know/Not Applicable / 55%
Other / 3%

Optical Component Suppliers.Among optical component suppliers, JDS Uniphase (23%) and Corning (20%) lead the market and appear strong going forward.

(9A) Question Asked: What about smaller companies? From which of the following smaller Optical Component Suppliers has your company purchased optical components/products over the past 6 months? (Check All That Apply)

Optical Cable / 5%
Digital Lightwave / 3%
Alliance Fiber Optic Products / 2%
Communications Systems Inc / 2%
LightPath Technologies / 2%
WJ Communications / 2%
Centillium Communications / 1%
Optelecom-NKF / 1%
Iolon / 0%
Isomet / 0%
Stockeryale / 0%
Stratos International / 0%
Don't Know/Not Applicable / 81%
Other / 6%

(9B) Question Asked: What about smaller companies? From which of the following smaller Optical Component Suppliers will your company be purchasing optical components/products from over the next 6 months? (Check All That Apply)

Optical Cable / 3%
Alliance Fiber Optic Products / 2%
Digital Lightwave / 2%
Optelecom-NKF / 2%
LightPath Technologies / 2%
Centillium Communications / 0%
Communications Systems Inc / 0%
Iolon / 0%
Isomet / 0%
Stockeryale / 0%
Stratos International / 0%
WJ Communications / 0%
Don't Know/Not Applicable / 84%
Other / 4%

Smaller Optical Component Suppliers. Optical Cable(5%) is the leading vendor among smaller optical component suppliers.

Respondents Working in Companies That Purchase Wireless Equipment (n=184)

(10) Question Asked: Thinking about your company's spending on wireless equipment – including WiMAX and WiFi – over the next 6 months – would you say your company intends to increase their spending on wireless equipment, decrease their spending, or will spending on wireless equipment remain the same compared to the previous 6 months?

Increased Wireless Equipment Spending Next 6 Months / 53%
Decreased Wireless Equipment Spending Next 6 Months / 5%
Spending Will Remain the Same Next 6 Months / 35%
Don't Know/ No Answer / 7%

Strong Wireless Spending. We also looked at wireless equipment spending, and a strong 53% project increases over the next 6 months compared to only 5% projecting a decrease.

(11A) Question Asked: From which of the following wireless equipment suppliers did your company purchase wireless equipment/services – including WiMAX and WiFi equipment/services – over the past 6 months? (Check All That Apply)

Motorola / 28%
Lucent / 23%
Nortel / 19%
Nokia / 16%
Qualcomm / 15%
Alcatel / 12%
Ericsson / 8%
Siemens / 5%
Harris Corp / 1%
Don't Know / 21%
Other / 11%

(11B) Question Asked: And over the next 6 months, from which of the following wireless equipment suppliers, will your company be purchasing wireless equipment/services – including WiMAX and WiFi – over the next 6 months? (Check All That Apply)

Motorola / 25%
Lucent / 18%
Nortel / 18%
Qualcomm / 15%
Nokia / 14%
Alcatel / 10%
Ericsson / 7%
Siemens / 5%
Harris Corp / 3%
Don't Know / 33%
Other / 9%

Wireless Equipment Vendors.Motorola(28%), Lucent (23%) and Nortel(19%) rank as the top three wireless equipment vendors in terms of market share over the past 6 months – and similarly going forward.

(12A) Question Asked: What about smaller companies? From which of the following smaller wireless equipment suppliers has your company purchased wireless equipment/services – including WiMAX and WiFi equipment/services – over the past 6 months? (Check All That Apply)

Alvarion (ALVR) / 10%
Proxim Corp (PROXQ.PK) / 5%
Airspan Networks (AIRN) / 3%
Wi-LAN Inc. (Toronto: WIN) / 3%
Ceragon Networks (CRNT) / 2%
SR Telecom Inc (Toronto: SRX) / 1%
Wave Wireless Corp (WVWC.OB; including WaveRider) / 0%
Don't Know / 76%
Other / 5%

(12B) Question Asked: What about smaller companies? Over the next 6 months, from which of the following smaller wireless equipment suppliers will your company be purchasing wireless equipment/services – including WiMAX and WiFi? (Check All That Apply)

Alvarion (ALVR) / 10%
Wi-LAN Inc. (Toronto: WIN) / 3%
Airspan Networks (AIRN) / 3%
Proxim Corp (PROXQ.PK) / 2%
SR Telecom Inc (Toronto: SRX) / 1%
Ceragon Networks (CRNT) / 1%
Wave Wireless Corp (WVWC.OB; including WaveRider) / 1%
Don't Know / 77%
Other / 5%

Smaller Wireless Equipment Vendors. Alvarion (10%) ranks as the clear leader among smaller wireless equipment vendors.

(13) Question Asked: Finally, Alcatel recently announced plans to acquire Lucent. If the merger is approved, which suppliers most stand to benefit or lose out?

(a) Suppliers that Most Stand to Benefit:

(n=52)

Alcatel / 27%
Lucent / 23%
Cisco / 19%
Nortel / 13%
Ericsson / 6%
JDS Uniphase / 6%
Other / 25%
No Change / 10%

(b) Suppliers that Most Stand to Lose Out:

(n=49)

Nortel / 43%
Cisco / 16%
Alcatel / 10%
Lucent / 12%
Ericsson / 10%
Motorola / 6%
Other / 24%
No Change / 12%

Who Gains and Loses From an Alcatel/Lucent Merger? We asked respondents who they thought stood to benefit and to lose most from an Alcatel/Lucent merger. The biggest beneficiaries named were Alcatel and Lucent – no surprises here. But the clear loser is believed to be Nortel, cited by 43% as the supplier most likely to lose out from the merger.

II. ChangeWave Research Methodology

This report presents the findings of a recent ChangeWave survey on Corporate Telecom and Optical Equipment Purchasing. The survey was conducted April18-27, 2006 and a total of 239Alliance members participated.

The Alliance’s proprietary research and business intelligence gathering system is based upon the systematic gathering of valuable business and investment information directly over the Internet from accredited members.