Light Reading
Last-minute pricing cut and CEO intervention has enabled Alcatel-Lucent to snatch long-haul WDM contract.

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: Moderator
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
Wagner’s Ring
Data Centers Drive Telcos Into the Future

8|28|14   |   2:20   |   (2) comments


Data centers are at the heart of key trends driving telecom -- network virtualization, the drive for increased agility, and the need to compete with OTT providers.
LRTV Custom TV
Why SPs Should Consider Cisco's EPN

8|27|14   |   5:40   |   (0) comments


Sultan Dawood from Cisco discusses Cisco's EPN, which enables SPs to build agile and programmable networks delivering new network virtualized services using Cisco's Evolved Services Platform (ESP).
LRTV Huawei Video Resource Center
Huawei’s Showcase @ Big Telecom Event 2014

8|26|14   |   2.56   |   (0) comments


SoftCOM is Huawei's framework for telecom business and network transformation. Haofei Liu, Solution Marketing Manager, Carrier Business Group, Huawei, showcases Huawei's SoftCOM architecture in this video.
LRTV Huawei Video Resource Center
Huawei @ BTE 2014: Director of Integrated Solutions on SoftCOM & NFV Monetization

8|26|14   |   4.43   |   (0) comments


Libin Dai, Director of Integrated Solutions, Carrier Business Group, discusses Huawei's SoftCOM and NFV monetization. Huawei believes that NFV monetization should be service-driven rather than network-driven, and that operators should have network transformation, service transformation and a compatible and collaborative ecosystem in place in order to deploy NFV.
LRTV Huawei Video Resource Center
Huawei @ BTE 2014: Director of US NFV Lab on CloudEdge & the Future of NFV

8|26|14   |   4.06   |   (0) comments


Sean Chen, Director of US NFV Lab at Huawei, discusses Huawei's new approach to NFV in open collaboration. Huawei believes that through Proof of Concept tests, it could help operators learn and communicate with the industry more effectively. Sean believes that successful implementation of NFV should have its values reaching to end users and discusses how Huawei's ...
LRTV Huawei Video Resource Center
Huawei's Highlights @ Big Telecom Event 2014

8|26|14   |   3.34   |   (0) comments


At the Big Telecom Event in Chicago Huawei showcases its high-level strategy, the SoftCOM architecture, which helps operators reduce the cost of ownership of their network infrastructure and generate additional revenue in the ICT service environment. Huawei showcases over 30 pilot programs from across the globe, focusing on the industry-leading commercial ...
LRTV Custom TV
VeEX – Live from the Show

8|21|14   |   5:58   |   (0) comments


An overview of VeEX Test and Measurement solutions including TX300S multi-service test set with VeExpress cloud-based management system, UX400 universal modular platform supporting 100G testing, and the redesigned RXT modular platform.
LRTV Custom TV
Transitioning CE 2.0 Networks Into the SDN & NFV Era With Telco Systems

8|19|14   |   5:19   |   (0) comments


Telco Systems' Ariel Efrati (CEO) and Moshe Shimon (VP of Product Management) discuss virtualization and how the company's new Open Metro Edge solution utilizes the SDN and NFV concepts to accelerate and orchestrate service delivery through its innovative product portfolio and software applications.
LRTV Custom TV
NFV Myths: Is NFV Still Several Years Away?

8|11|14   |   1:13   |   (0) comments


Some say that NFV (network functions virtualization) is still several years away from being implemented on mobile operator networks. This isn't the case. Operators can get started on their paths to NFV now, as this short video from Skyfire shows.
LRTV Custom TV
A New Security Paradigm in SDN/NFV

7|28|14   |   02:54   |   (0) comments


Paul Shaneck, Global Director Network Solutions for Symantec, discusses the evolving virtualized network, explaining how Symantec is leading the security discussion as it relates to SDN and NFV, and helping to ensure the network is protected and compliant.
LRTV Documentaries
Sprint's Network Evolution

7|24|14   |   14:59   |   (0) comments


Sprint's Jay Bluhm gives a keynote speech at the Big Telecom Event (BTE) about Sprint's network and services evolution strategy, including Spark.
LRTV Documentaries
BTE Keynote: The Software-Defined Operator

7|24|14   |   18:43   |   (1) comment


Deutsche Telekom's Axel Clauberg explains the concept of the software-defined operator to the Big Telecom Event (BTE) crowd.
Upcoming Live Events!!
September 16, 2014, Santa Clara, CA
September 16, 2014, Santa Clara, CA
September 23, 2014, Denver, CO
October 29, 2014, New York City
November 6, 2014, Santa Clara
November 11, 2014, Atlanta, GA
December 9-10, 2014, Reykjavik, Iceland
June 9-10, 2015, Chicago, IL
Infographics
A survey conducted by Vasona Networks suggests that 72% of mobile users expect good performance all the time, and they'll blame the network operator when it's not up to par.
Today's Cartoon
Hot Topics
Rogers, Shaw Take Aim at Netflix
Mari Silbey, Independent Technology Editor, 8/26/2014
Utilities to Pump $11.2B Into Smart Grid – Study
Jason Meyers, Senior Editor, Utility Communications/IoT, 8/26/2014
Verizon Launches QR Code Security Solution
Carol Wilson, Editor-at-large, 8/26/2014
Nokia's Maps Land on Samsung Devices
Sarah Reedy, Senior Editor, 8/29/2014
Verizon to Launch HD VoLTE in 'Coming Weeks'
Sarah Reedy, Senior Editor, 8/26/2014
Like Us on Facebook
Twitter Feed