Ciena Links Up With Luminous
Ciena Corp. (Nasdaq: CIEN) has made a strategic investment in Luminous Networks Inc. and signed a worldwide reseller agreement with the RPR startup (see Ciena Teams With, Invests in Luminous).
The move comes just 15 days after Ciena made a similar deal with edge router maker Laurel Networks Inc. (see Ciena Takes Stake in Laurel). Both potential deals were anticipated by Light Reading back in August (see Is Ciena Eyeing Luminous & Laurel?) and point to Ciena's ongoing campaign to extend its product capabilities by dipping into its $1.3 billion in cash and short-term investments to align itself with promising startups.
Neither Ciena nor Luminous are disclosing how much of Luminous' $25 million in new funding came from Ciena. But the companies say Ciena was one of two lead investors in this Series E round, along with DCM-Doll Capital Management.
The roster of Luminous' other investors and strategic partners is enormous and includes Scientific-Atlanta Inc. (NYSE: SFA), with which it has developed video-on-demand gear (see Scientific Atlanta Enables VOD).
A prepared statement from Luminous says the funding should see the company through to profitability in 2004. It brings Luminous' equity financing to over $173 million so far.
With this latest deal, as well as the Laurel one, Ciena is fleshing out its goal of becoming an end-to-end player in multiservice networking by increasing its edge capabilities. It's also a vote of confidence for RPR, which Ciena views as a growing market. Ciena spokesman Aaron Graham says Luminous has had solid traction with RPR not only in the Asia/Pacific region, where sources say the technology has been largely neglected until now, but also in Europe, the Middle East, and Africa.
At least one analyst sees the move as prescient on Ciena's part. "It is a sign that RPR is maturing, and carriers are starting to ask for it to support efficient transport of packet services. Not just Ethernet services, but legacy Layer 2 services, broadband access backhaul, and even storage over IP," says Scott Clavenna, chief analyst at Heavy Reading.
With Laurel and now Luminous, Ciena is also continuing a pattern it began with its 2002 investments in Équipe Communications Corp. and WaveSmith for core and edge multiservice switching (see Équipe Partners With Ciena, Scores $40M and WaveSmith Gets $30M, Signs With Ciena). Those deals culminated in Ciena's purchase of WaveSmith this year in a transaction valued at $158 million (see Ciena Nabs WaveSmith). Might Luminous be next?
Some industry sources have argued that Laurel should be a priority for Ciena, since IP routing is key to U.S. carriers right now. Still, Laurel may resist an outright buy, based on past behavior (see Laurel: Startup Holdout? ). It also could demand a high price – one Ciena may balk at, given its cautious approach to acquisitions.
For the time being, Ciena's hedging its bets, content with its staged investment strategy – and keeping options open. "We've shown before [that acquisitions are] not something we'd rule out," says Graham.
— Mary Jander, Senior Editor, Light Reading