MOUNTAIN VIEW, CA - April 9, 2002.

The financial condition of telecom carriers is yet to improve in 2002. The lack of recovery has severely affected optical equipment manufacturers and in turn, the optical components industry. A recent report by Strategies Unlimited examines the industry food chain and provides a near-term outlook of the future for the optical components market. The report takes a top-down look at the telecom industry by presenting trends in internet and bandwidth growth, the effect on carriers, as well as op tical equipment industry, and finally, the repercussions the optical component manufacturers face.

Market Update- April 2002 Optical Networking Components provides a quarterly outlook for the optical subsystems and components markets. Vendor sales can be complex as they span multiple layers of the supply chain. Consequently, Strategies Unlimited's forecasts correlate aggregate, "bottoms-up" estimates of product sales with "top-down" worldwide trends in revenues, capital expenditures, and system buildouts to provide a more accurate picture of the quarters to come .

Strategies Unlimited believes that capital spending among carriers will decline 21% by the end of 2002. As a reflection of this, the entire industry is affected. The effect on the optical component industry is substantial. By the end of 2002, the report states subsystem revenues will fall by 65% and optical component revenues will decline by 60% from 2001 levels.

Fortunately, Strategies Unlimited predicts a gentle recovery for the overall sector in 2003 which is expected to come in stages. By examining inventories within different segments of the optical component market, the report points out that some components will see an initial recovery in unit sales as early as 2002, while others will have to wait until 2003 until existing inventories are exhausted and for growth in new system orders. As the growth in sales is fueled primarily by declining inv entories, component vendors will need to be ready to react to new orders with little warning. Only by 2004 will products that support transparent networks and 40 Gbps systems begin to emerge.

Components that will have earlier success are those that combine high unit sales and high unit prices, such as lasers and detectors. Signaling subsystems such as transponders are also expected to see an earlier rebound. Components such as amplifiers and dispersion compensators that depend on new system sales will see slower growth.

The game plan to survive the downturn for the well-established players as well as the new entrants in the industry should be to:

• Lower fixed costs
• Allow for integration
• Manage inventory
• Invest in R&D

To understand the health of the industry as a whole, the report also provides a review of the quarterly revenues and key financials of the major players in the industry.

Market Update - April 2002 Optical Networking Components is available from Strategies Unlimited for $2,450. More information on the report is available by contacting Strategies Unlimited on +1 650 941-3438