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Verizon Teases at Infinera Event

Craig Matsumoto
News Analysis
Craig Matsumoto

SUNNYVALE, Calif. -- Wall Street analysts got their hopes up Thursday morning when they found out Verizon Communications Inc. (NYSE: VZ) was speaking at Infinera Corp. (Nasdaq: INFN)'s DTN-X product launch here. Could Infinera have finally landed one of the big U.S. telcos as a customer?


After the event's live webcast was done, analysts swarmed the stage to talk to Stuart Elby, Verizon's vice president of technology. He told them his company hasn't even issued the request for proposals (RFPs) for the long-haul packet-optical transport platform (P-OTP), the dream box that he's described to vendors for a couple of years. (See Verizon Rethinks Long Haul.)

(The P-OTP request for information (RFI) is out, at least, Elby said.)

Analysts' next question, asked rather bluntly, was, "Why are you here?" Elby explained that Verizon has been working with equipment vendors to plan next-generation transport architectures and coach them toward building something like a P-OTP. Infinera is included in that number, and Verizon's input did help shape the DTN-X's development.

Verizon's primary long-haul transport vendors are Alcatel-Lucent (NYSE: ALU) and Ciena Corp. (NYSE: CIEN). Elby said the carrier is willing to add another. Low price alone wouldn't be enough; Verizon would be looking for big cost savings, something around 30 to 50 percent. If Verizon can "get that kind of dramatic change in long-term cost structure by taking that step, we'll do it," Elby said.

The DTN-X certainly has dramatic potential. Each card can send 500 Gbit/s of data, and the system integrates Optical Transport Network (OTN) switching down to the ODU-0 (1Gbit/s) level. MPLS transport will eventually be integrated, although Infinera hasn't said when. (See Infinera Unleashes Coherent 100G.)

But as one analyst told Light Reading, it's reasonable to think that Verizon's RFP might not really come out until 2013, with winners chosen in 2014. By that time, it's conceivable that AlcaLu and Ciena (Verizon's current long-haul transport vendors) will have come out with their DTN-X responses. So, Verizon isn't necessarily a slam dunk for the DTN-X.

Even so, Verizon is earnestly interested, and it's not alone. Andrew Schmitt of Infonetics Research Inc. and Eve Griliches of ACG Research both noted that carriers love what they've seen from Infinera.

"The expectations of the financial analysts are pretty low, and the expectations of the operators and their opinions of Infinera are pretty high," said Schmitt. (He thinks the DTN-X release will get the financial analysts to warm up to Infinera more.)

Infinera has room for improvement, though. Product cycles have to come more quickly, for instance. "They've got to move to more of the Intel Corp. (Nasdaq: INTC) tick-tock model," where chips are moved to more advanced manufacturing processes on a regular basis, Schmitt says.

There's some evidence Infinera will be doing this. Infinera says its 500Gbit/s photonic integrated circuit will be followed by a 1Tbit/s version (ten 100Gbit/s wavelengths) in 2014 or 2015, then a 2Tbit/s version a couple of years later.

— Craig Matsumoto, West Coast Editor, Light Reading

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Pete Baldwin
Pete Baldwin,
User Rank: Light Beer
12/5/2012 | 4:53:31 PM
re: Verizon Teases at Infinera Event

The Wall Street analysts really were impressed that Verizon came out to talk at this event, but I'm not the only one who thought bigger things were being implied there. Elby deflated those assumptions pretty quickly.

Randy Niklaus, CTO of XO, also talked -- less surprising, considering XO is already a customer. He speaks at a lot of venues, but he gives out a lot of technical info, and the analysts appreciated that.

Matthew Finnie of Interoute wasn't there but recorded a video speech. That didn't get much buzz at the event -- but Interoute can't complain. They got got their own LR story out of this!

User Rank: Light Beer
12/5/2012 | 4:53:26 PM
re: Verizon Teases at Infinera Event

He thinks the DTN-X release will get the financial analysts to warm up to Infinera more.

A quick review of infn's record so far:

<li>2007 Inverse 40G MUX </li>
<li>2009 40G PICs out of development </li>
<li>2010 Kill 40G, go do 100G coherent </li>
<li>2011 Demo PICs with 100G coherent </li>

Would Andrew like to make a comment about execution record and how that will affect the&nbsp;analysts' view?


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