Ciena's Cyan Buy: It's All About the Software
Ciena's bid to acquire Cyan pushes the packet-optical vendor deeper into the SDN/NFV software market, giving Ciena the keys to Cyan's Blue Planet ecosystem just as that software platform is starting to gain real traction with service providers.
Announced this morning, the $400 million deal comes as traditional network hardware vendors like Ciena are looking to stake a claim in the SDN/NFV race. Cyan, one of the smaller players in the optical networking market, has pursued SDN/NFV orchestration for service provider networks more aggressively than most, and recently announced a long-awaited contract with CenturyLink for its Blue Planet orchestration software. (See Ciena to Acquire Cyan for $400M and Cyan's CenturyLink Win Built on Experience, Flexibility.)
Ciena Corp. (NYSE: CIEN) has long been a fan of the open networking model espoused by Cyan Inc. , as demonstrated by Ciena's own OPn network architecture. Last year, Ciena augmented that commitment by announcing its Agility Matrix platform, focused on enabling virtual network functions at the enterprise edge. Adding Cyan's Blue Planet will give Ciena a higher-level SDN play across service provider networks. (See and Ciena Amps Up Software Play, Attacks VNF 'Agility Gap'.)
"Unlike the router establishment, we are not threatened by virtualization and openness," Ciena CEO Gary Smith said on a call announcing the acquisition. "The network must become a software platform more capable of driving on-demand business models."
However, the SDN/NFV migration is still in its Wild West days, a fact that may have proved to challenging for Cyan to overcome alone. It has created a broad ecosystem in support of its Blue Planet software, including some of the biggest names in networking, and had gotten the platform into labs and trial with many carriers. But, Cyan also has been under financial pressure as it has looked to turn those engagements into revenue. The company was forced to seek additional financing late last year to support ongoing operations. (See Cyan Seeks Funding in SDN Squeeze and Cyan to Net $46.6M in Notes Sale.)
"Putting that ecosystem in the hands of Ciena changes the game completely," said Heavy Reading senior analyst Sterling Perrin. "They will be able to do more and drive standards better than a $100 million company, without question. This is a very good move for Cyan, which was bouncing into a ceiling as far as where it could go as a company."
Ciena may prove cautious about expecting too much too soon from the acquisition. The deal is expected to close in the fourth quarter, and Ciena officials said they don't expect significant revenue coming in from Cyan's software this year. They described the deal as "a medium- to long-term investment in a nascent software market."
On the hardware side, there might be some overlap between platforms like Ciena's 6500 and Cyan's Z-Series that will need to be negotiated, but on the call Ciena officials didn't have much to say yet about the integration project to come after the deal closes.
In any case, it looks like we correctly tagged Cyan as a seller in our recent guide to optical's summer of love -- and we obviously should have been more confident about calling Ciena a buyer. (See A Guide to Optical's Summer of Love.) Perrin noted that the Ciena-Cyan deal fits with the growing theme of consolidation in the optical market, even though the main drivers may have been less about the optical layer than what lies above. This week's announcement comes just a few weeks after Nokia Networks announced it would acquire Alcatel-Lucent (NYSE: ALU), and Infinera Corp. (Nasdaq: INFN) committed to buy Transmode Systems AB . (See Nokia & Alcatel-Lucent to Combine and Infinera Coming Closer to Mastering the Metro.)
— Dan O'Shea, Managing Editor, Light Reading