Ciena reported continued growth today with expectations for more to come, buoyed by seemingly insatiable demand for increased network capacity and an ongoing transition from legacy network architectures to Ethernet and IP.

The equipment vendor's revenue was up nearly 6% sequentially and up more than 34% from a year earlier to $205 million in its fiscal third quarter. The company expects its annual revenue to grow 37% this fiscal year, in a slight upward revision of its previous 36% prediction.

On this morning's conference call, Tim Savageaux, analyst for Merriman Curhan Ford, described current market conditions in a question to Ciena executives: "We've been hearing pretty recently from major carriers feedback suggesting that, by the time these guys install new lambdas, they're pretty much exhausted. Bandwidth demand forecasts are pretty rapidly and vastly exceeding what these carriers would have said, say, a year ago."

"The combination of our customers' improving financial performance and the potential for new application drivers such as mobile video, IPTV, HDTV and video peering provides a very robust macro outlook for the industry over the next two to three years," said Gary Smith, CEO for Ciena. "However, not all industry players are likely to benefit equally from this outlook. We believe Ciena's been able to grow faster than the market because of our exposure to capacity-related demand and the transition to Ethernet- and IP-based network infrastructure."

Nearly half of Ciena's quarterly revenue came from three large North American carriers. The vendor's biggest source of revenue was its core switching business, which grew more than 30% sequentially to contribute $61 million in the quarter

Sales of Ciena's 4200 metro optical platform were up 15% sequentially and more than double their year-ago level to $23 million in the quarter, representing more than 11% of total revenue. More than 100 customers have now purchased the 4200 worldwide, Ciena said. But the company eventually expects the product to contribute roughly twice as much quarterly revenue as it does today. "A lot of the challenges we're having now [with the 4200] are related to revenue recognition," Smith said. "As we work through those, $40 million looks to be around the right kind of number."

When asked about request for proposal (RFP) activity — amid recent rumors that Ciena has been excluded from some significant optical RFPs — Smith said, "We're seeing activity up overall on the year as well as in RFPs. But RFPs are not the only indicator. A fair amount of business comes from outside necessarily formal large RFPs."