& cplSiteName &

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 Verizonís 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        ADD A COMMENT
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: Light Sabre
1/29/2014 | 6:22:24 PM
Re: ALU business model
Infinera has 15 Tier One customers globally.
rgrutza600
100%
0%
rgrutza600,
User Rank: Light Sabre
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: Light Sabre
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: Light Sabre
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   >   >>
From The Founder
Light Reading today starts a new voyage as part of a larger Enterprise.
Flash Poll
Live Streaming Video
Charting the CSP's Future
Six different communications service providers join to debate their visions of the future CSP, following a landmark presentation from AT&T on its massive virtualization efforts and a look back on where the telecom industry has been and where it's going from two industry veterans.
LRTV Interviews
No Stopping Cable's Ethernet Gains

12|9|16   |     |   (0) comments


Vertical Systems' Erin Dunne explains why US cable operators, which now command a record-high 26% of the Ethernet market, will keep boosting their share.
LRTV Interviews
Fixing IoT Security Is an Ecosystem Challenge

12|9|16   |   05:34   |   (1) comment


Level 3 Communications' Chief Security Officer Dale Drew says service providers, manufacturers and even consumers must combine to halt massive DDoS attacks using IoT devices in botnets. The solution he has in mind includes reputation-based routing by the service provider but also more secure endpoint devices and greater consumer awareness.
LRTV Interviews
Cox Clears $2B in Business Revenue

12|8|16   |     |   (0) comments


Cox's Jeff Breaux discusses how the third-largest US MSO will reach the $2 billion revenue mark this year and plans to hit $3 billion by 2021
LRTV Interviews
Can Cable Climb Upmarket?

12|7|16   |     |   (0) comments


Carol Wilson and Alan Breznick assess cable's prospects for winning more enterprises in a landscape rocked by corporate M&A activity.
Women in Comms Introduction Videos
TalkTalk Exec: Find Your North Star at Work

12|7|16   |   3:38   |   (1) comment


Women need to find their purpose, a professional North Star, and create a personal board for themselves, according to Alex Tempest, director of partners at TalkTalk Business.
LRTV Interviews
Verizon: Beware Unknown Unknowns

12|7|16   |   04:58   |   (0) comments


Chris Novak, director of the Verizon Enterprise Solutions Risk Team, explains that enterprises who don't conduct a thorough audit of their assets often leave some things unprotected because they don't know they exist. Many times these unprotected assets are part of corporate M&A activity but left unshielded they can become a hacker's playground, he tells Light ...
LRTV Interviews
ETSI's CTO Talks NFV, 5G & NGP

12|5|16   |   09:45   |   (0) comments


Adrian Scrase, CTO at standards body ETSI, talks about the various initiatives and specifications developments related to NFV, 5G and NGP (next-generation protocols) that will underpin next-gen networks.
Women in Comms Introduction Videos
Korn Ferry Consultant: How to Find, Cultivate & Be the Best Talent

11|30|16   |   4:10   |   (2) comments


Erin Callaghan, a managing consultant for Korn Ferry Futurestep, shares strategies for companies to improve how they recruit and for women to ensure they don't get lost in the pipeline.
LRTV Custom TV
We Can Make the World More Sustainable

11|29|16   |     |   (0) comments


GeSI is a global e-Sustainability Initiative organization bringing together 40 big multinational companies around the world. According to GeSI's report, information and communication technology can make the world more sustainable. Luis Neves, chairman of GeSI, shared with us his opinion at Ultra-broadband Forum (UBBF2016).
LRTV Custom TV
Finding a New Way to Engage Customers & Drive Revenue

11|29|16   |     |   (0) comments


Mobile revenues are declining. Digicel, a player in the Caribbean telecommunications/entertainment space, has found a new way to engage customers and drive revenue. John Quinn, CTO of Digicel, shared with us its story at Ultra-broadband Forum (UBBF2016)
LRTV Custom TV
Do You Really Need Gigabit Infrastructure?

11|29|16   |     |   (0) comments


Altibox is the biggest fiber-to-the-home (FTTH) player and the largest provider of video and TV in Norway. They started out with zero customers in 2002. Now they have close to half a million households and companies attached to their FTTH business. Nils Arne, CEO of Altibox shared with us their story and insight on 5G at Ultra-broadband Forum (UBBF2016).
LRTV Custom TV
BTís Openreach Strategy & Its Updates in 2016

11|29|16   |     |   (0) comments


A lot of developments at Openreach this year in terms of strategy and planned investments. Peter Bell, CIO of Openreach BT, shared with us the updates of Openreach at Ultra-broadband Forum (UBBF2016).
Upcoming Live Events
May 16-17, 2017, Austin Convention Center, Austin, TX
All Upcoming Live Events
Infographics
Hot Topics
Cable Nodes Becoming a Choke Point
Brian Santo, Senior editor, Test & Measurement / Components, Light Reading, 12/5/2016
Consolidated Snaps Up Fairpoint for $1.5B
Iain Morris, News Editor, 12/5/2016
Small Arctic ISP Caches Netflix in New Way
Mari Silbey, Senior Editor, Cable/Video, 12/7/2016
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
Eyal Waldman, CEO of Mellanox Technologies, speaks to Steve Saunders, CEO of Light Reading, for an exclusive interview about the 100 GB cable challenge, cybersecurity and much more.
Join us for an in-depth interview between Steve Saunders of Light Reading and Alexis Black Bjorlin of Intel as they discuss the release of the company's Silicon Photonics platform, its performance, long-term prospects, customer expectations and much more.
Animals with Phones
A Mobile Safari Click Here
Literally.
Latest Comment
Live Digital Audio

Even when there's a strong pipeline of female talent in the comms industry, it tends to leak all the way to the top. McKinsey & Company says women experience pipeline leakage at three primary points: being unable to enter, being stuck in the middle or being locked out of the top. Each pipeline pain point presents its own challenges, but also opportunities to stop the leak. Wireless operator Sprint is making a conscious effort to improve its own pipeline from new recruits to the C-suite, and it wants the rest of the industry to do the same. In this Women in Comms radio show, WiC Board Member and Sprint Vice President of Enterprise Sales Nelly Pitocco will give us her take on the industry's pipeline challenges. Pitocco, who joined Sprint in May and has spent 20 years in the comms industry, will also offer solutions, share how Sprint is tackling the challenge within its own organization and take your questions live on air.