Ciena Wins C&W Deal

The marketing battle between Tellium Inc. (Nasdaq: TELM) and Ciena Corp. (Nasdaq: CIEN) rages on.

Yesterday, Ciena announced a deal with Cable and Wireless (NYSE: CWP), one of Tellium's three announced customers (see C&W Chooses Ciena). Coincidentally, the release came out the day before Tellium was supposed to announce its third-quarter 2001 earnings.

Ciena executives say that the timing of its announcement was not planned to coincide with Tellium's earnings. But Tellium’s CEO Harry Carr has his doubts.

“I think it is very curious timing, especially since they have been leaking this out to investors for a while,” he says. “It made me laugh, because it is a tactic I’ve seen them use before. When we were doing our IPO road show they announced a customer right around when we were pricing our shares. Actually, I’m flattered by the fact that they feel that we are someone to worry enough about to plan such announcements.”

The news struck a sensitive chord with investors who have been waiting to hear about new customer wins from Tellium, sending that company’s stock down slightly. Tellium’s stock closed down 0.02 (4.57%) at 5.01, while Ciena finished up 0.61 (3.65%) at 17.32.

But analysts say the stock market's negative reaction may be overblown, since Cable and Wireless still plans to deploy Tellium’s Aurora optical switch in the core of its network for full lambda switching. According to Phil Green, senior vice president of the network technology group at Cable and Wireless, Ciena’s CoreDirector will be used at the edge of the network to groom traffic down to the STS1 (51.8 Mbit/s) level. The provider also plans to use its network management system to provide sub-lambda wavelength management from the network edge out to the customer.

Deployment of Ciena’s CoreDirectors has already begun, and Ciena executives expect that its products will be deployed in 17 cities in the United States and nine cities in Europe.

Ciena has already been supplying Cable and Wireless with metro switching gear as well as long-haul optical transport gear.

Green says that Cable and Wireless’s architecture also calls for a core lambda switch that will switch traffic at OC48 (2.5 Gbit/s) and above. This is where Tellium’s Aurora switch will be used.

“The two products are really complementary,” he says. “Ciena provides the on-and-off ramp and can break traffic down into lower increments of bandwidth. And Tellium provides the heavy-duty lambda switching across the network.”

Cable and Wireless is now the second major carrier to announce that it has deployed both Ciena and Tellium gear in this kind of tiered architecture. Qwest Communications International Corp. (NYSE: Q) is also deploying CoreDirectors for sub-lambda grooming and the Aurora switches for full lambda switching. Tellium’s Carr says this is further validation that the architecture of a tiered network is necessary.

Still, Ciena argues that carriers could reduce costs by using just one switch to do both lambda switching up to OC192 (10 Gbit/s) speeds and traffic grooming at the sub-lambda level.

“What we have seen with customers is that they have wavelength traffic and they have sub-wavelength traffic,” says Beth Perry, Ciena's senior vice president for core switching and corporate network management. “We have one product to address both needs. From an operational standpoint our customers tell us it saves them money to have them in one box.”

So far, Ciena hasn't convinced Cable and Wireless that this is the case. ”They haven’t demonstrated OC192 in our lab,” says Green. “I know they have plans to develop this, but the jury is still out on that. We don’t see a pressing need for lambda switching yet, but when we do, we already have a relationship with Tellium.”

But this doesn’t mean that Tellium is completely out of the woods. While Cable and Wireless still plans to use its switches in its network, it says that it doesn’t see a pressing need for the technology any time soon. Originally, Tellium had expected to recognize revenue from the Cable and Wireless deal by the end of this year, but Green says that it will be some time before full lambda switching will be needed in the Cable and Wireless network.

He says that IP traffic is still growing at its usual 100 percent growth rate per year but that improvements in routing technology have decreased the urgency for optical switching in the core. This has pushed out the need for full lambda switching for at least 12 months, he says: “At the moment, full-scale lambda switching is somewhere off in the future. We don’t have a need for it at this stage. For this year and next year, I have to prioritize what we will spend our money on based on very tight financial constraints. Unless I can see a direct return on investment, it will have to wait.” But Green does see a pressing need for flexible access technology, and that is why the carrier has decided to go ahead with the deployment of the CoreDirector switches.

So what does this mean for Tellium? With only three announced customers, Tellium is in desperate need of announcing new contracts (see Tellium's Growing Pains). Its Dynegy Inc. (NYSE: DYN) contract, which makes up the lion’s share of its revenues right now, is petering out, says Kevin Slocum an analyst with Wit Soundview.

“I think everyone is going to be looking to see what they say about new customers on the conference call,” says Slocum.

— Marguerite Reardon, Senior Editor, Light Reading
captain_photon 12/4/2012 | 7:41:08 PM
re: Ciena Wins C&W Deal You wrote: "CienaGÇÖs CoreDirector will be used at the edge of the network to groom traffic down to the STS1 (64 kbit/s) level. "

Isn't a STS1=51.84Mbps. STS1 is the lowest granularity on the CD nor 64Kbps. If CW wants to groom to that level, or even T1, they'll have to put an additional box/boxes at the edge...
physical_layer_photons 12/4/2012 | 7:41:07 PM
re: Ciena Wins C&W Deal Kudos to the PR team at Ciena. First it's leaked they beat Nortel at Qwest the day of Nortel earnings (or lack of) and then Cable and Wireless the day Tellium announces.

Good job guys.
5514DD 12/4/2012 | 7:40:53 PM
re: Ciena Wins C&W Deal STS-1 is a DS0? Who does your editing, BLOUGH or DD?
Sacsun 12/4/2012 | 7:40:52 PM
re: Ciena Wins C&W Deal I agree. They have a polished PR Team. Everytime one reads anything about Telecom, CIENA's name pops up. Good for them, they deserve it.
Sacsun 12/4/2012 | 7:40:52 PM
re: Ciena Wins C&W Deal I believe and STS-1 is the electrical equivalent of an OC-1, At 51.8 Mbps. A DS-0 is 64 Kbps.
roshnee 12/4/2012 | 7:40:37 PM
re: Ciena Wins C&W Deal
Or lack thereof ... that's an interesting comment. Any more info anyone?
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