ADVA AG Optical Networking (Frankfurt: ADV), a vendor of metro and enterprise DWDM (dense wave division multiplexing) platforms, today announced completion of an OEM agreement with Fujitsu Network Communications Inc. (FNC).

The partnership looks promising for both parties. ADVA, which has a solid presence in metro DWDM in Europe, needs help entering the stateside market. Fujitsu, a key Sonet player with the U.S. RBOCs, needs to round out its metro product line.

It remains to be seen, however, whether the partners can achieve together what they can't individually. The metro market is seeing increasing competition from a number of players, old and new, and an ongoing downturn in capital spending is causing even the best-laid plans to gang aglay.

Financial terms of the deal are undisclosed (see Fujitsu to Resell ADVA Products). It calls for Fujitsu to resell ADVA's Fiber Service Platform (FSP) 500 and FSP 3000 boxes in North America as members of Fujitsu's newly minted product lineup for the carrier metro edge and premises market. ADVA's FSP 500 will become Fujitsu's Flashwave 7410 edge or premises device; the larger FSP 3000, which was recently unveiled at the CeBIT tradeshow in Europe (see ADVA to Shake Its Metro Money-Maker) will become the Flashwave 7420 metro access platform for points of presence.

Fujitsu declines to say with which vendors it compared ADVA in making its selection. ADVA competes internationally with a range of metro DWDM players, including LuxN Inc., Nortel Networks Corp. (NYSE/Toronto: NT), and ONI Systems Inc. (Nasdaq: ONIS).

Fujitsu has its own series of long-haul DWDM products, including the Flashwave 7700 and 7600. It also has one low-end metro DWDM offering, the Metro 7100. But company officials say it chose ADVA's products to get more-sophisticated premises units, for instance ones that can be installed in the basement of a large building, linking carrier customers to the point of presence for a range of services.

Fujitsu officials also say the company plans to complete its metro lineup by announcing its own DWDM box for the metro core within the next four to five weeks.

In the meantime, Fujitsu will integrate ADVA's new gear into its net management system. It's also footing the bill for the resold wares to undergo Osmine certification with Telcordia Technologies Inc., typically a multimillion-dollar expense. Osmine is considered a prerequisite for doing business with the U.S. RBOCs.

Such a chance to gain direct access to the RBOC market has ADVA plainly ecstatic. "This is a huge market opportunity for us... It gives us unprecedented access to one of the largest market segments, that of the ILECs, including the RBOCs," says Abdul Kasim, VP of marketing at ADVA.

Despite solid growth from its European sales (see ADVA Reports 2001 Earnings), the company has been continually frustrated by its lack of U.S. presence. A resale agreement with Cisco Systems Inc. (Nasdaq: CSCO) only covers ADVA's FSP-II, a older, low-end product geared primarily to the enterprise market, which Cisco sells as its Metro 1500. Deals with Inrange Technologies Corp. (Nasdaq: INRG) and Storage Technology Corp. (StorageTek) (NYSE: STK) are focused on enterprise storage.

Fujitsu is more subdued about the arrangement but says it's glad to have gotten some help rounding out its metro product line. "It was a classic case of build versus buy," says FNC spokesperson John Stewart. "We needed to fill a gap in our premises line. And ADVA needed a channel to the North American market."

Analysts say the news is a vote of confidence for ADVA, but it remains to be seen whether the partnership can stand up to the rigors of the U.S. market -- and the ongoing downturn there. "First we need to see if the market is coming back," says analyst Vidar Kalvoy of DG Bank in Frankfurt. He also notes that Fujitsu, while a force to be reckoned with in the Sonet space, hasn't sold any of these solutions into the metro market yet.

"It's literally new territory," says Stewart. "We have no sales or customers today for the new products."

But ADVA remains gung-ho. "This is clearly a strategic thing," says Kasim. "You can see that from the Osmine process FNC's already started and from its integration of our equipment with its element management system. That indicates heavy investment and shows [FNC] sees the opportunity that clearly exists, notwithstanding the short-term problems in the market."

ADVA says it plans to unveil several OEM contracts in the Asia-Pacific region, specifically Japan and Australia, within the next few weeks.

— Mary Jander, Senior Editor, Light Reading
http://www.lightreading.com