Ciena Invests in Turin

After paying $1B for an MSPP in 2000, Ciena invests $5M+ in the multiservice Sonet startup and will OEM its gear

December 2, 2004

3 Min Read
Ciena Invests in Turin

Fresh from an executive staff shuffle, Turin Networks Inc. has found a new partner in North America to sell its multiservice provisioning platform (MSPP) to large telecom carriers: Ciena Corp. (Nasdaq: CIEN).

Ciena, in fact, confirms that it has made an investment in Turin and is now rebranding the company's entire Traverse product line as its CN 3600 series of intelligent optical multiservice switches.

Ciena won't say how much money it put into Turin, but a source close to both companies says the amount was around $5.5 million. Ciena's last 10-Q statement includes a note that $5.5M came out of "cash flows from investing activities: minority equity investment," without naming the company.

According to Turin, the latest funding came as part of a Series F financing round led by Motorola Inc. (NYSE: MOT) in 2003. That was a $17 million round at the time. In September 2004, that round was opened up again and another $6 million was added from Ciena and a combination of existing investors. Turin has raised more than $170 million since its inception.

Because of the deal with Turin, Ciena is putting its MetroDirector K2 out to pasture. Ciena says it won't be doing any new development on the K2, but it will keep selling and supporting the product, while moving customers to the CN 3600 series.

The K2 came to Ciena through its acquisition of Cyras Systems, in a deal worth $2.6 billion when it was announced in December 2000 (see Ciena To Buy Cyras for $2.6 Billion). If you take into consideration Ciena's slipping share price, however, the deal was worth only about $1.1 billion, when the acquisition closed three months later.

"We contemplated adding development on the K2, but the Turin product was already there," says Stephen Barr, Ciena's director of metro and enterprise solutions marketing.

Turin has let its year-long OEM agreement with UTStarcom Inc. (Nasdaq: UTSI) expire (see Turin, UTStarcom Team Up). The company has maintained its relationship with Motorola, however, and Motorola will continue to be Turin's face in the cable equipment market (see Motorola Gets Tighter With Turin).

Turin has also shuffled its executive staff, though the company says this has nothing to do with its arrangement with Ciena. On November 16, Turin added Henry Wasik as its new CEO, and its founder, John Webley, assumed the role of chief marketing officer. It also added Dan Steimle as its new chief financial officer. Steimle was the CFO when Advanced Fibre Communications Inc. (AFC) went public back in 1996 (see Turin Appoints CEO, CMO).

Ciena says its CN 3600 line is already being purchased to use as a Sonet/SDH gateway in one global carrier, an existing Ciena customer.

The main opportunity that Ciena sees for the CN 3600 is as a small-office digital crossconnect (DCS). Ciena's argument is that small to mid-sized central offices need traffic to be multiplexed from high-speed channels (OC48s and OC12s) down to smaller signals (STS or VT1.5) but can't justify the $600,000 price tag for a large-sized DCS.

As such, Ciena will be going head-to-head with Cisco Systems Inc. (Nasdaq: CSCO), Alcatel SA (NYSE: ALA; Paris: CGEP:PA), Polaris Networks, Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA), and White Rock Networks Inc., depending on the application.

"This partnership had a lot of benefits," says Kevin Wade, Turin's spokesman. "It's kind of like an arranged marriage."

— Phil Harvey, News Editor, Light Reading

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