Alcatel Wins Sprint Metro DWDM Deal

Alcatel's set to be Sprint's North American DWDM supplier. Ciena looks to have lost out UPDATED 2/12 10:30AM

February 11, 2003

4 Min Read
Alcatel Wins Sprint Metro DWDM Deal

Alcatel SA (NYSE: ALA; Paris: CGEP:PA) has been picked by Sprint Corp. (NYSE: FON) to supply metro DWDM gear to the carrier throughout the United States (see Sprint Picks Alcatel for DWDM).

Terms of the deal were not disclosed, but Alcatel says Sprint plans a nationwide rollout of the Alcatel 1696 Metro Span DWDM platform and accompanying Alcatel 1353 network management system, over an unspecified timeline. A deployment for Sprint in Las Vegas, Nevada, already is in place, the vendor says.

The deal is a significant win for Alcatel, even though it may not change anyone's outlook for next year. Specifically, it gives it a leg up, perception-wise, over competitor Ciena Corp. (Nasdaq: CIEN).

Both Alcatel and Ciena have long-standing relationships with Sprint, which appear to be helping the vendors gain business for other projects. Sprint, Alcatel, and Ciena officials all declined to say who was in the running for the contract that Alcatel won. But analysts say it's apparent Ciena lost the RFP.

"Ciena has announced deals with Sprint for long-haul DWDM (going back to Ciena's beginnings), as well as CoreDirector, and MetroDirector K2," writes Sterling Perrin, senior research analyst at IDC, in an email today. "Ciena has not announced Sprint as a customer for its original MultiWave Metro products or the ONI ONLINE products [it acquired through its ONI acquisition]. So, Alcatel appears to have a jump on Ciena here."

At least one financial analyst agrees. "It's certainly bad news for Ciena," says analyst Simon Leopold of Merrill Lynch & Co. Inc. But he stresses that it won't change his estimates on Ciena's outlook. For fiscal 2003, he notes, the ONI Online boxes that most closely compete against the 1696 will probably bring in about 12 percent of Ciena's sales.

Why did Alcatel win this contract? After all, besides Ciena, there's plenty of competition from metro DWDM market leader Nortel Networks Corp. (NYSE/Toronto: NT) -- as well as from a slew of other players, including ADVA AG Optical Networking (Frankfurt: ADV), Cisco Systems Inc. (Nasdaq: CSCO), Fujitsu Ltd. (KLS: FUJI.KL), Lucent Technologies Inc. (NYSE: LU), and Sorrento Networks Corp. (Nasdaq: FIBR), to name just a few.

What's more, at least two analysts report that Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA) is sharing this contract win with Alcatel and that its 7100 Optical Transport System was picked, too. Stay tuned for a separate story.

Alcatel maintains that a key feature that helped it win was a concentration capability it calls "4 by any." Basically, Alcatel encapsulates four channels of any kind of traffic onto a single optical wavelength (a Sonet STS-48c), using Sonet wrapper technology. This capability, Alcatel claims, enables the vendor to eliminate an extra crossconnect box that would otherwise be required to convert multiple traffic types into Sonet STS-1 channels for delivery over the wavelength network.

Perrin of IDC says Alcatel's approach seems unique. He says all metro DWDM vendors are intent on packing multiple channels of traffic into a single wavelength, using different techniques. What Alcatel does, however, is ensure that rather than allocating one channel to each traffic type, all traffic can run over one channel, making better use of the wavelength network.

Sprint hadn't answered a question on just why Alcatel won the DWDM contract at press time. But it looks as though features such as "4 by any" are helping the vendor establish a place in the metro DWDM market, where it's a relative newcomer. The 1696, for instance, was announced in May 2001 (see Alcatel Unveils DWDM System), and there have since been a handful of public announcements on contract wins (see Alcatel Lights Bangkok Metro, Alcatel DWDM in Hong Kong, and Alcatel Makes Waves Overseas).

Alcatel says it now has more than 30 customers globally for the 1696, and it expects more business to come. "This [Sprint contract] is a good example of where the market is going," says Tim Krause, VP of marketing for Alcatel's newly hatched Fixed Communications Division (see Alcatel Redefines Itself). While long-haul DWDM is "still in compression mode," he says, there's plenty of opportunity in metro networks, where applications are just being built, not added onto.

Krause says the Sprint win demonstrates a change from the outlook a couple of years ago. Back then, he notes, it was widely believed that U.S. RBOCs would lead demand for metro DWDM, thanks to their need for more capacity to use in local services. That scenario didn't materialize, Krause notes. Instead, the metro DWDM market is focused at carriers of all kinds that are trying to meet enterprise needs for applications such as storage-area networking (SAN), data center interconnect, and high-availability links.

Perrin of IDC anticipates the metro DWDM market to nearly triple within the next couple of years, growing from about $646 million this year to over $1.8 billion by 2006.

— Mary Jander, Senior Editor, Light Reading

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