George Notter: Got it. And then I’m sorry, normal pre-pandemic lead times were — what range also…
James E. Moylan, Jr.: In the portfolio for us, it was mid-single digits for weeks.
Gary B. Smith: Depending on the product line.
George Notter: Got it. Okay. And do you think it’s the case that customer inventories are — is the issue — it sounds like the issue is mostly North America. Is it broad-based across North America or is it more concentrated around a handful of customers?
Gary B. Smith: I would say it is North America. It’s one or two examples internationally, but they’re not super meaningful to this conversation. I think it’s mainly North America, and it’s mainly the Tier 1s, but it is sort of shared challenge across most of the larger carriers in North America who have obviously tried to get out ahead of the whole supply chain piece. But now you’ve got this dynamic, where we and other vendors are turning up with enormous amounts of equipment. I mean, I think we shipped 24% more equipment last year than we did the prior year. And you think about all those trucks turning up at the same time with a bunch of other vendors to put the system together, and that’s causing the challenges around their capacity and all the various facets of people, storage, logistics, fiber availability, etcetera, to back up.
And it’s just taken longer than we all including them, would like or anticipate. And to your earlier point, until we kind of move down through that path and particularly with reduced lead times is it’s super logical as to why we see the orders being what they — what they are. They are improving, and we are seeing the deployment. I want to stress that. This is not a sort of binary event. It’s — we’re seeing improvements in absorption. The inventories are coming down. We’re seeing an increase in orders in service providers. It’s just not the step function, I think we collectively anticipated.
George Notter: And to be clear, in this context, we’re referring not just to telecom service providers, but MSO service…
Gary B. Smith: Yes, I’d include cable in there, too.
James E. Moylan, Jr.: Yes.
George Notter: Thank you guys.
Operator: Next question comes from Michael Genovese with Rosenblatt Securities. Please go ahead.
Michael Genovese: Oh great, thanks. I wanted to follow up on the last question because I understand mostly what you’re talking about with these North American service provider challenges, but the comment on fiber availability, could you flush that out a little bit more, I’m kind of struggling to come up to speed with what that means?
James E. Moylan, Jr.: Michael, you probably can appreciate the majority — like the big builds and equipment consumptions or when people are putting down new routes or lighting new fibers, the process of procuring those fibers, even though everybody has intentions to put more fiber in the ground as North American customers have announced, there’s a process of construction there, and it takes time. And this I think is exasperated by the labor market in North America as well. So getting access to the fiber, tension is there. Timing is taking longer. Going through characterization of that fiber and then finally doing the construction delighted is just taking longer than we had anticipated with the volume that they’re trying to do.
They’re working through it. Our visibility to it and where we can help our customers is on our installation services, and you can see that is up period-over-period quite substantially, it is happening. It’s just taking longer than we anticipated going into the year.
Michael Genovese: Okay, great. And then I guess my next question, just the competitive environment for DCI, I mean it seems like you’ve maintained a very high level of market share in DCI. As ZR has become more important, are you finding a different set of competitors in the market or how has the competitive environment changed recently in DCI, if at all?
James E. Moylan, Jr.: Yes, I think, two different views of it, I guess, the ZR impact has not impacted our business at all. In fact, you can see record quarters for Waveserver in Q1, 2024 results, massive, massive Waveserver and that’s all DCI or for the most part, all DCI. So it’s clearly not impacting our business as some people may have impacted our business with the webscale is up like 57% year-on-year, for — last year for 2023. So again, a big part of that is various different flavors of data center interconnect. So clearly not having a negative impact there. And in fact, I think you do the math and the market size, you’ll conclude that we gain share with the GCNs last year. In terms of the number of competitors from a pluggable perspective, yes, you start to get different sort of consumption models.
At the end of the day, it’s still a very limited number of folks that are investing in the key technologies that go into these ZR plugs. You have various different ecosystems that are trying to put them together. I’m a firm believer from a philosophy perspective, if you don’t own some of the core technologies, you’re probably not long for that world. But that will take some time to play out. And as you know, we own and control our own destiny and all those key technologies.
Gary B. Smith: And just to be clear, we have roughly 50% market share globally with web-scale companies. If you take out that, which Huawei does, which is just about entirely in China, then it gets to be a bit higher than that. So we’re very comfortable with our share position, and we think it’s going to remain at that level, probably hard for us to gain share from this point because they all want a second source. But we’ll take 50% plus.
Michael Genovese: Thanks so much.
Gary B. Smith: Thanks Mike.
Operator: Next question comes from Alex Henderson with Needham. Please go ahead.
