This week's report from MKM Partners on AT&T's future buying habits appears to paint a bleak picture for Cisco in the future realm of virtualization, but its overall view of that giant company's future is actually much more measured -- and includes the very likely possibility that Cisco, and possibly Juniper Networks, will be making major acquisitions in the near future to buttress their positions. (See: MKM: Cisco Biggest Loser in AT&T SDN Plans.)
As a result, the industry could see major consolidation affecting optical transport vendors such as Infinera Corp. and Ciena Corp.
For the near-term, the report notes that AT&T Inc. (and by extrapolation other major carriers) "will continue to buy routers from Cisco, Juniper Networks Inc., and Alcatel-Lucent and Optical transport equipment from Ciena in 2014-2016, and likely well beyond."
After that, MKM Partners expects the full convergence of network layers 0 through 3, as network gear compliant with network functions virtualization (NFV) is deployed, enabling data and optical equipment to merge into virtualized wide-area network routing.
"We expect that Juniper and Cisco will continue to sell WAN packet networking equipment to AT&T well into the future, but they may need to add ultra-high capacity coherent Optical transport to their product capabilities," MKM notes. "For this reason, we view best-of-breed Optical transport vendors like Ciena and Infinera as potential acquisition targets for the larger Router vendors such as Cisco and Juniper over the next several years."
We know that NFV and its partner in virtualization, software-defined networking (SDN), will be major disruptors in the public network, and this report is one interesting glimpse into how that disruption is beginning to play out.
— Carol Wilson, Editor-at-Large, Light Reading