Ciena Breaks New Optical Ground

Ciena (NYSE: CIEN) surprised the digital equipment market this week with the unveiling of its latest series of optical core components, dubbed WaveLogic 6 -- just in time for the Mobile World Congress in Barcelona and the OFC conference in San Diego March 5-9.

This new generation of coherent optical components is significant on several fronts. First, Ciena claims that compared with its previous WaveLogic 5 generation, WaveLogic 6 doubles wavelength capacity, reduces space and power per bit by at least 50%, and improves spectral efficiency by at least 15%. The transceivers support 1.6 Tbit/s across metro datacenter interconnections (DCI) and 800 Gbit/s across the longest links within the network, Ciena says.

All this may be extremely technical information, but it is music to the ears of carriers, hyperscalers, and metro network managers intent on handling the avalanche of data transmitted over their networks while improving operating efficiency.

“WaveLogic 6 pushes the envelope and will help us execute on our network evolution plans and climate change goals,” stated Laurie Miller, CEO of Southern Cross, the trans-Pacific submarine cable company, in Ciena’s press release. “With … performance simulations showing 1Tb/s wavelength transmission across 12,000km links in our network, we are already looking forward to announcing another networking world first.”

“Bell’s national network is WaveLogic 6 ready and we look forward to the service delivery efficiencies that come with 800 Gigabit per second connectivity,” stated Nicholas Payant, VP operation services and core network at Bell Canada, in the same release.

Stock Watchers Applaud

Market watchers welcomed the announcement. Raymond James analyst Simon Leopold wrote in a note to investors yesterday that Ciena has beat rivals Nokia (NYSE: NOK) and Cisco (Nasdaq: CSCO) in optical transmission capabilities (both vendors have announced 1.2 Tbit/s transceivers, he notes). But he emphasizes the operating efficiencies of Ciena’s new series even more than the speed record:

“The Street may focus on the dimension of maximum transmission rate, but there is more to the story. Operators care about reach, i.e., how far can the signal travel before losing fidelity? Customers also care about space and power consumption. Ciena’s new technology enables operators to transport 12.8 T in half the space consuming half the power of Ciena’s WaveLogic 5…. [W]e see ‘performance per watt’ as the productivity KPI that will differentiate vendors.”

No Slowdown in Demand

Ciena's announcement comes at a time when, unlike several of its competitors, Ciena has been relatively bullish about demand for its products near term. On the company's latest earnings call, execs called for 16% to 18% growth in revenues for 2023, thanks to a backlog of orders released by supply chain loosenings, along with growing demand by carriers and hyperscalers for heftier networking gear. Here's how James E. Moylan, SVP of finance and CFO of Ciena, put it on the call:

"Looking beyond next year, we remain confident in the positive secular demand drivers, including continued growth in bandwidth demand, which over a long period of time has been unaffected by macroeconomic conditions.

"We believe our customers will be compelled to prioritize network CapEx to address this demand over the coming quarters and years. "

Two Versions

Ciena is offering WaveLogic 6 components in two versions:

WaveLogic 6 Extreme (WL6e) stresses performance. This is where Ciena boasts the 1.6 Tbit/s single-carrier wavelengths for metro networks, with 800-Gbit/s across the longest connections and an overall 50% reduction in space and power per bit compared to existing Ciena components. Ciena is also claiming a world record for WL6e – operation at 200 Gbaud/s, or gigabaud/second, referring to the number of optical signal units transmitted, another factor in optical efficiency.

WaveLogic 6 Nano (WL6n) is designed for “footprint efficiency” in pluggable elements for 400G and 800G long-haul and metro or regional switches and routers. Ciena boasts that the WL6n will be “bring coherent technology inside the datacenter campus for the first time.”

The WaveLogic 6 components are set to ship during the first half of 2024 – a seemingly long time in market terms. Still, Ciena can claim to have broken ground in the optical space ahead of its competitors, and as it delivers the goods, the optical player could enable further expansion of the world’s largest networks.