Ciena Lands $200M Deal With McLeod

Western CLEC picks Ciena, following an RFP that included Nortel, Sycamore, and Tellium

February 7, 2001

2 Min Read
Ciena Lands $200M Deal With McLeod

McLeodUSA (Nasdaq: MCLD) will spend $200 million over two years to buy several of Ciena's optical networking products, both companies announced this morning (see Ciena, McCleod Close $200M Deal).

McLeodUSA is an unprofitable emerging CLEC (competitive local exchange carrier), which means it's a notch below the trophy customer on the financial level. But the deal represents a significant win for Ciena Corp. (Nasdaq: CIEN) on the technical level. The optical networking vendor beat several competitors to the deal, including Nortel Networks Corp. (NYSE/TSE: NT), Sycamore Networks Inc. (Nasdaq: SCMR), and Tellium Inc., which were all among the companies included in the original RFP, according to a McLeodUSA official.

McLeodUSA is based in Cedar City, Iowa. It primarily serves the Rocky Mountain region, offering voice and data services. It reported over $1.4 billion in revenue in 2000, but it is also largely unprofitable and in debt. The company lost $500 million during 2000.

On the technology side, the deal is important because McLeodUSA has opted to build a next-generation mesh backbone based on DWDM (dense wavelength-division multiplexing), rather than selecting equipment based on a Sonet architecture. Several Ciena products, including the CoreDirector switch, CoreStream transport product, and the LightWorks management system will be used to build the network, according to both companies.

"Ciena's technical maturity in the industry and the feature sets on their CoreDirector and CoreStream platforms were key selling points," wrote Robert Adams, director of network planning at McLeodUSA, in responding to questions that were emailed to him by Light Reading.

The deal is not exclusive, however, according to Adams. "McLeodUSA will not be put into a position of single vendor dependence." "For us, what's important is you have a carrier basing its network on a new mesh architecture instead of Sonet ADMs," said Denny Bilter, senior director of marketing with Ciena.

The deal was announced on the same day that Ciena raised a total of $1.5 billion in a combined debt and secondary stock offering (see doclink 3564). Ciena shares were trading down 2.00 (1.78%) at 83, in late afternoon trading.

-- R. Scott Raynovich, executive editor, Light Reading

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