March 24, 2004
It used to be that if an equipment RFP required optical grooming switches, Ciena Corp. (Nasdaq: CIEN) was the vendor to beat. Ciena's CoreDirector product emerged in 2000 and 2001 as a new product defining the category.
But times have changed -- and so have the products. This may be most clearly demonstrated by some RFP activity in which Ciena is looking to fend off competition in the metro switching market, as it tries to win business in a top RBOC account, SBC Communications Inc. (NYSE: SBC).
SBC is said to be in the market for a next-generation optical switch, according to a research note by UBS Investment Research analyst Nikos Theodosopoulos. The note says the contract is for less than $50 million and the winner(s) will likely be chosen by this summer.
Ciena is expected to be a major contender. But so are Lucent Technologies Inc. (NYSE: LU) and Alcatel SA (NYSE: ALA; Paris: CGEP:PA), according to Theodosopoulos. “Given that Ciena has emerged as a more significant supplier to SBC via recent acquisitions, this may better position CoreDirector to win this contract,” he writes.
A Ciena spokesman says the company's CoreDirector product is in three RBOC lab trials and is also involved in some RBOC RFP responses.
The question that most people have, however, is whether Ciena can break that glass ceiling and win a big account at an RBOC network with the CoreDirector. So far, CoreDirector's bread and butter has traditionally been the competitive local exchange carriers (CLECs), and inter-exchange carriers (IXCs), which have very different core switching needs.
This has been the heart and soul of Ciena's acquistion strategy, where it bought WaveSmith specifically for a shot at business with Verizon Communications Inc. (NYSE: VZ), which it appears to have landed (see Ciena Seals Verizon Deal). As Theodosopoulos points out, many believe that Ciena’s entrée into RBOC networks via acquisition will help it get attention for its aging product lines.
But given the raft of new switching/grooming competitors and the company’s financial misgivings, there is a reason to doubt Ciena’s odds (see Ciena Buying Binge Alarms Analysts). And a further examination of the RBOC's needs reveals a weakness in Ciena's approach.
What SBC most likely needs is a product category that Light Reading Inc.'s research division, Heavy Reading, calls the MSSP (multiservice switching platform). (See The Money's on MSPPs and The Death & Life of Sonet/SDH.) These boxes are designed to sit in large carrier points of presence (POPs) to consolidate the functions of several disparate network elements, including Sonet ADMs; wideband and broadband digital crossconnects; and ATM and Ethernet switches.
Table 1: MSSP Universe at a Glance
1670 (SDH), 1677 (Sonet), 1680 (Sonet)
Surpass hiT 7070
Optix 10G (SDH)
CoreDirector (Note: No packet aggregation or VT1.5/ VC12 switching)
SmartPhotoniX PMM Multi-Layers Switch (MLS)
SN16000 (Note: No packet aggregation or VT1.5/VC12 switching)
MetroWave 8100MC, MetroWave 8300
Barracuda Transport Aware Switch
Source: Heavy Reading
While Ciena’s CoreDirector addresses this space, it doesn’t compare favorably to some other competitors, including SBC’s incumbent supplier Lucent. That's because RBOC networks are more likely to need aggregation than core switching, according to Scott Clavenna, chief analyst at Heavy Reading.
"If you look at who's in the metro for SBC, you'd have to think Lucent's Lambda Unite has a good shot here,” he says. “Nortel’s OME 6500 also makes sense. The wildcard is Mahi Networks, which has been tracking along fairly well with SBC and has proven interoperability with all their MSPP vendors."
The bottom line? The resurgence of some key incumbents -- such as Alcatel and Lucent -- as well as upstarts like Mahi is turning the switching market into an entirely new battle, and an interesting one to watch. The SBC contract may provide a clue as to where the market is going as RBOCs step up their interest in optical switching and aggregation devices.
SBC declined to comment on the RFP.
— Phil Harvey, News Editor, Light Reading
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