Sources say the startup's got two wins, including a possible $50M MCI deal

Craig Matsumoto, Editor-in-Chief, Light Reading

March 3, 2006

3 Min Read
Has Hammerhead Nailed Verizon?

Edge-switch vendor Hammerhead Systems Inc. says it's landed two big customers, and one analyst thinks MCI LLC is one of them.

The startup's HSX 6000 system could be included in the Converged Packet Access (CPA) network built by MCI, now owned by Verizon Communications Inc. (NYSE: VZ), Simon Leopold of Morgan Keegan & Company Inc. wrote in a note to clients on Wednesday. If he's right, Hammerhead could beat competitor Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA) for some deployments.

Hammerhead "has won approvals for deployment at MCI for smaller U.S. markets and some international markets that might otherwise suit Tellabs' smaller 8830," Leopold wrote.

It's important to note Hammerhead has only been approved; how much it gets deployed is yet to be seen. A Verizon spokeswoman would only say that vendors are "doing testing and certification in our labs" but haven't been formally selected. "We probably will be reaching a decision in the next couple of months," she says. Publicly, Hammerhead claims to have landed two large customers using the HSX as an aggregator. One is a multiservice job in an Internet Protocol (IP) and Multiprotocol Label Switching (MPLS) network; presumably this would be the MCI deal. Leopold didn't peg a dollar figure to it, but sources say it exceeds $50 million.

The other, smaller, deal involves aggregating business Ethernet traffic. The smaller customer hasn't been revealed yet, but sources for some time have presumed Savvis (Nasdaq: SVVS) to be a Hammerhead prospect.

A Hammerhead spokesperson refused to comment and would not verify the identity of either customer. Tellabs likewise declined to comment.

Sources say both deals were sealed with the help of reseller partner Fujitsu Ltd. (Tokyo: 6702; London: FUJ; OTC: FJTSY). (See Fujitsu OEMs Hammerhead Switch.)

Selection of an alternative vendor to Tellabs wouldn't be unusual for Verizon. "We've always believed we should have at least two vendors" for large network buildouts, the Verizon spokeswoman says. It's not as if Hammerhead would replace Tellabs entirely; Leopold believes MCI to be quite happy with the Tellabs 8800s it's deployed.

Having a big name like MCI in the pipeline may have helped Hammerhead amass $30 million more in funding, a round announced just weeks ago. The company recently hired Bell Labs luminary Richard Gitlin as CTO and is starting a push to land some big-name carrier trials in Europe. (See Hammerhead Nails Another $30M, Hammerhead Adds Gitlin, and Hammerhead Pushes Plans.)

Hammerhead first aimed for the multiservice edge, where specialized boxes were envisioned as collecting various older traffic types -- Frame Relay and Asynchronous Transfer Mode (ATM), especially -- and depositing them onto an IP/MPLS network core. Competition raged in that niche, however, and observers say Hammerhead, facing the likes of Alcatel (NYSE: ALA; Paris: CGEP:PA), Cisco Systems Inc. (Nasdaq: CSCO), and Juniper Networks Inc. (NYSE: JNPR), had to find a new angle.

Nowadays, the company is heavy into Pseudowires -- a means of providing ATM-like circuit connections across an IP network. Hammerhead's senior management underwent an overhaul, and by the end of 2004, the company had settled on pseudowires as its best hope. (See Hammerhead Founder Steps Aside, Hammerhead Names New CEO, and Hammerhead Retools MPLS Approach.)

— Craig Matsumoto, Senior Editor, Light Reading

About the Author(s)

Craig Matsumoto

Editor-in-Chief, Light Reading

Yes, THAT Craig Matsumoto – who used to be at Light Reading from 2002 until 2013 and then went away and did other stuff and now HE'S BACK! As Editor-in-Chief. Go Craig!!

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