Light Reading

Analyst: Infinera Loses VZ Deal to AlcaLu

Carol Wilson
1/21/2014
100%
0%

A telecom industry financial analyst says that Alcatel-Lucent has won a $100 million Verizon optical contract, which would be bad news for Infinera, the company that had been thought to be the front-runner for deal.

Infinera Corp. (Nasdaq: INFN) had been seen as the favorite to join Ciena Corp. (NYSE: CIEN) as a second supplier to Verizon with long-haul WDM optical equipment in what was pegged to be a $100 million contract. Wavelength-division multiplexing (WDM) equipment can help pump up the bandwidth of long-haul fiber optic networks.(See Is Infinera Set for Verizon 100G Deal? and Wavelength Division Multiplexing (WDM).)

George Notter, managing director of equity research for communications infrastructure at Jefferies & Co. Inc. , says he's revising his price target for Infinera's stock down from $12 to $8, based on not winning the long-sought Verizon Communications Inc. (NYSE: VZ) second supplier deal.

Notter also notes his sources are crediting the last-minute involvement of Alcatel-Lucent (NYSE: ALU) Michel Combes and some major price-cutting for the French vendor's victory at Verizon.

"We're told that pricing was exceedingly low -- in fact it was 'well below market pricing' for WDM gear," Notter says in an email note. "The anecdote serves as another reminder that the best technology doesn't always win in the Communications Infrastructure space. We understood that Infinera's DTN-X platform was heavily favored by Verizon’s technology people. Relationships and pricing can go a long way -- particularly for equipment suppliers like Alcatel-Lucent which have the clout to sell their infrastructure within the C-suite at Verizon."

Losing Verizon would have a significant impact on Infinera because of the effort and resources the equipment maker has invested in trying to win the business, Notter notes, as well as the inability to use Verizon as a reference account to win other business.

"These activities include joint product testing/evaluation, trials, and technology analysis," he writes. "Also, we believe that much of its work on integrating Ethernet/MPLS Switching technology was oriented around the RBOC's second source deal. Verizon is somewhat unique among major carriers around the world -- they've been very interested in embedding these capabilities into the Optical Transport network layer."

Alcatel-Lucent and Verizon both declined to comment on the report. Infinera was unavailable for comment.

— Carol Wilson, Editor-at-Large, Light Reading

(25)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View
Page 1 / 3   >   >>
tojofay
50%
50%
tojofay,
User Rank: Light Sabre
1/30/2014 | 11:27:34 AM
Re: ALU business model
Indeed. Where did Simona of GS go? 
rgrutza600
100%
0%
rgrutza600,
User Rank: Lightning
1/29/2014 | 6:22:24 PM
Re: ALU business model
Infinera has 15 Tier One customers globally.
rgrutza600
100%
0%
rgrutza600,
User Rank: Lightning
1/29/2014 | 6:18:35 PM
Re: ALU business model
Infinera acknowledged winning Level 3 business in their CC today although they did not say their name.  Highly interesting conference call.
TGIR2
0%
100%
TGIR2,
User Rank: Light Beer
1/24/2014 | 1:40:05 PM
Re: ALU business model
Sterling,  There is quite a difference in their current product vs the DTN however.  The DTN-X is a big iron solution which looks like it was developed for the Tier 1 customers.  You add bandwidth in 500G chunks.  ( I realize they have a pay as you go option but still ).  The DTN actually looked like a box developed for the other category.  They sold it to a rural cooperative in Georgia (a 4 county network) for example.  It's hard to see how they can be successful with the DTN-X without capturing some of the Tier 1s.  It certainly puts more pressure on them to get Level 3.
sterlingperrin
50%
50%
sterlingperrin,
User Rank: Lightning
1/23/2014 | 2:48:32 PM
Re: ALU business model
As a back of the envelope analysis:

NA LH DWDM was about $900 million in 2012, of which $550 million (at most) would have gone to AT&T + Verizon. AT&T and Verizon capex combined in 2012 was about $35 billion which puts their LH DWDM spend at about 1.6% of capex (or lower). If you include regional DWDM spend as well, then the % ticks up a little.

Sterling
rgrutza600
50%
50%
rgrutza600,
User Rank: Lightning
1/22/2014 | 6:52:04 PM
Re: ALU business model
RE:When you think about the percentage of North American capex contributed from AT&T and Verizon

 

It would be nice to have a breakout for how much of that cap ex goes towards long-haul.  It seems like it is an almost insignificant portion of their cap ex compared to wireless.  Level 3 spends $200 million/quarter with zero towards wireless, but their fiber network dwarfs VZ or T.
rgrutza600
100%
0%
rgrutza600,
User Rank: Lightning
1/22/2014 | 6:46:14 PM
Re: ALU business model
Other people's money is always the best source of funding.  Thank you President Hollande and Karl Marx. <G>
peebee1
50%
50%
peebee1,
User Rank: Light Beer
1/22/2014 | 9:35:40 AM
Re: ALU business model
Surely ALU wouldnt be selling below cost, its far more likely Ciena has been ripping Verizon off for way too long!
sterlingperrin
50%
50%
sterlingperrin,
User Rank: Lightning
1/22/2014 | 9:34:52 AM
Re: ALU business model
I can't confirm whether this is true or not, so just posting based on the published report. My first read was that this is a horrendous development for the future of Infinera. But then I started thinking about Infinera's history in the 10G market.

They actually rose to become the leading North American supplier of long haul DWDM equipment (very quickly) without ever having AT&T or Verizon as their customers. When you think about the percentage of North American capex contributed from AT&T and Verizon, it's pretty amazing that a supplier can go anywhere without these two. But Infinera did that.

On the ALU win itself (again, based on the published report), I am also surprised. Infinera has been courting Verizon for a long time and there was a history of collaboration between the Infinera and VZ technical teams. I did not see that collaboration occurring between ALU and VZ.

Sterling
chuckj
100%
0%
chuckj,
User Rank: Light Sabre
1/22/2014 | 1:25:09 AM
Re: ALU business model
French subsidizing US infrastructure, that can't be a bad thing.
Page 1 / 3   >   >>
Flash Poll
From The Founder
Networks of the future will rely on "white box" switches and servers rather than proprietary hardware and that's going to alter the shape of the communications industry. Who says so? John Chambers.
LRTV Huawei Video Resource Center
Huawei Intros Smart Device for eLTE

3|30|15   |   05:25   |   (0) comments


Huawei has developed a secure, location-aware multimedia smartphone for its eLTE trunked radio solution, says Huawei's Norman Frisch.
LRTV Huawei Video Resource Center
Win Video, Win All

3|30|15   |   06:44   |   (0) comments


Video is going to be the next main source of revenue for operators. Operators have big opportunities and advantages to monetize video services. Globally, Huawei has helped more than 70 operators achieve over 30 million video subscribers. Watch this video for more.
LRTV Custom TV
The Benefits of HyperScale Clouds for NFV

3|27|15   |   01:50   |   (0) comments


Hyperscale cloud has been developed by the Internet giants to support the creation and delivery of software-based services at blistering speeds, and at the lowest possible cost. The original ETSI NFV vision was to adopt hyperscale cloud architecture and practices. This vision has become somewhat obscured along the way, due to misunderstandings about the hyperscale ...
LRTV Huawei Video Resource Center
eLTE Rapid Meets the Need for Speed

3|26|15   |   4:45   |   (0) comments


Designed especially for emergency and dedicated ad hoc local mobile communications coverage, Huawei's eLTE Rapid solution can deliver trunked voice, video and data coverage for multiple users over a 6km range and be set up in just 15 minutes, explains Huawei's Norman Frisch.
LRTV Huawei Video Resource Center
On Videos: Challenges & Opportunities

3|26|15   |   5:56   |   (0) comments


Most everything is now connected. And along with 4K and 4G technologies, everyone could be creating and broadcasting video contents. Users are expecting better video experience with any screen, anywhere and anytime. Operators will meet new challenges, but also see some big opportunities.
LRTV Custom TV
JDSU: Delivering Dynamic Networks for a Personalized Experience

3|26|15   |   5:59   |   (0) comments


Light Reading speaks to JDSU at Mobile World Congress 2015 about new solutions in the areas of HetNets, VoLTE, backhaul, virtualization, big data analytics, and real-time intelligence.
LRTV Custom TV
Smarter Service Chaining & New Ways to Benefit From Qosmos Technology

3|25|15   |   03:11   |   (0) comments


David Le Goff, director of strategic and product marketing at Qosmos, explains how the company has added application awareness to subscriber information to make service chaining more efficient and reduce costs for networking and infrastructure. In addition, Qosmos technology, which has been delivered as C libraries, is now also available as a virtual machine, ...
Between the CEOs
Qosmos CEO: The Changing Face of DPI

3|24|15   |   13:53   |   (0) comments


LR CEO and Founder Steve Saunders sits down with the head of Qosmos to talk about the changing state of the art in deep packet inspection technology, including its role in SDN and NFV architectures. Also, how the comms market is becoming more like the automotive industry.
LRTV Huawei Video Resource Center
FC Schalke Scores With Its Agile Stadium

3|24|15   |   6:23   |   (0) comments


Top German soccer club FC Schalke 04 has deployed a new, agile WiFi network from Huawei in its Veltins-Arena stadium and is reaping the benefits in terms of customer satisfaction and business opportunities, explains marketing chief Alexander Jobst.
LRTV Huawei Video Resource Center
Huawei’s Insights on Mobile Video

3|24|15   |   7:51   |   (0) comments


More people than ever are now watching videos on smartphones. Seventy percent of mobile traffic will be video traffic until 2018. In this video, Huawei's exports give their insights on mobile video in terms of business model, network planning and 4G network construction.
LRTV Documentaries
The Rise of Industry 4.0

3|24|15   |   02:26   |   (9) comments


Are you ready for the fourth industrial revolution? It's a big deal for influential operators such as Deutsche Telekom.
LRTV Huawei Video Resource Center
Getting Connected With eLTE

3|23|15   |   06:04   |   (0) comments


Trunked radio communications have entered the 4G LTE world, and with Huawei's eLTE solution, can now deliver a full range of data and video services as well as push-to-talk voice, explains Huawei's Norman Frisch.
Upcoming Live Events
April 14, 2015, The Westin Times Square, New York City, NY
May 5, 2015, Hyatt McCormick Place, Chicago, IL
May 6, 2015, Georgia World Congress, Atlanta, GA
May 12, 2015, Grand Hyatt, Denver, CO
May 13-14, 2015, The Westin Peachtree, Atlanta, GA
June 8, 2015, Chicago, IL
June 9-10, 2015, Chicago, IL
June 9, 2015, Chicago, IL
June 10, 2015, Chicago, IL
September 29-30, 2015, The Westin Grand Müchen, Munich, Germany
All Upcoming Live Events
Hot Topics
AT&T Woos SMBs With Small-Scale WiFi
Sarah Thomas, Editorial Operations Director, 3/26/2015
Just Don't Say IBM Is 'Relaunching' Networking Business
Mitch Wagner, West Coast Bureau Chief, Light Reading, 3/26/2015
Carriers Are Bright Spot in BlackBerry Q4
Sarah Thomas, Editorial Operations Director, 3/27/2015
TV Everywhere Nears Mainstream Adoption
Mari Silbey, Independent Technology Editor, 3/27/2015
Comcast Says TWC Deal Will Close Later
Mari Silbey, Independent Technology Editor, 3/26/2015
Like Us on Facebook
Twitter Feed
Webinar Archive
BETWEEN THE CEOs - Executive Interviews
LR CEO and Founder Steve Saunders sits down with the head of Qosmos to talk about the changing state of the art in deep packet inspection technology, including its role in SDN and NFV architectures.
Chattanooga’s EPB publicly owned utility comms company has become a poster child for how to enable a local economy using next-gen networking technology. Steve Saunders, Founder of Light Reading, sits down with Harold DePriest, president and CEO of EPB, to learn how EPB is bringing big time tech to small town America.
Cats with Phones
Interspecies Phone Love Click Here
"No, you hang up."
"No, YOU hang up."
Latest Comment