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Optical/IP

Analysts Narrow RFP Odds

The buzz surrounding two U.S. requests for proposal (RFPs) is homing in on several vendors said to have made the "shortlists."

The first list is for the Global Information Grid Bandwidth Expansion (GIG-BE) project, an optical network proposal from the U.S. Defense Information Systems Agency.

In a note to clients today, analyst Steven Levy and colleagues at Lehman Brothers say new information targets Ciena Corp. (Nasdaq: CIEN), Cisco Systems Inc. (Nasdaq: CSCO), Corvis Corp. (Nasdaq: CORV), Lucent Technologies Inc. (NYSE: LU), and Sycamore Networks Inc. (Nasdaq: SCMR) as finalists in a lab bakeoff that Science Applications International Corp. (SAIC) is conducting for the government.

Lehman's prediction is in line with the analysts' earlier speculation (see Lehman Spots Gov't RFP Surprises) and an announcement from Corvis (see Corvis Solo in Bake-Off Boast), but there are a couple of surprises: First, Sycamore was considered a strong contender all along, but the analysts didn't include it as a finalist before. Now, it looks as if Sycamore has beaten Lucent Technologies Inc. (NYSE: LU) into the optical crossconnect bakeoff, joining Ciena as a finalist there, one of the four categories of gear DISA's evaluating for the $800 million to $900 million project. The other three categories are optical transport, IP routers, and multiservice provisioning platforms.

Another surprise is the absence of Nortel Networks Corp. (NYSE/Toronto: NT) from the Lehman shortlist. Steve Levy says he has no sense of why Nortel hasn't made it to the finals -- at least, according to his sources. But he stresses these RFP shortlists aren't written in stone: "We... understand that some vendors not chosen for the final testing continue to negotiate with DISA/SAIC in order to get a spot for the bakeoff lab testing, and may ultimately secure a spot... things may change before contracts are awarded," he writes in today's note.

As of press time, none of the vendors mentioned in this article had any fresh comments to make. With the exception of Corvis, they seem to have been struck dumb with fear of revealing anything to the press regarding these RFPs. A final surprise: Lehman isn't sure who'll make it to the IP Router bakeoff, but the firm is sticking with speculation early in July that Cisco and Juniper Networks Inc. (Nasdaq: JNPR) might "split the subcontract win."

Table 1: Lehman's Latest GIG-BE Snapshot
GIG-BE RFP subcontract Est. size over 2 years Probable winner(s)
Optical transport $200M to $300M Ciena, Corvis
Optical crossconnect $100M to $150M Ciena, Sycamore
MSPP $150M to $200M Cisco, Lucent
Source: Steven Levy, Tim Luke, and Marcus L. Kupferschmidt, Lehman Brothers Equity Research


The Lehman findings tally generally with those of other financial researchers. In a note published by analysts at UBS Investment Research on July 31, however, there was a key difference: The UBS analysts said Lucent would likely end up with Corvis as the finalist in optical transport, since the government wasn't likely to pick more than one primary provider per subcontract category. Ciena was already thought to be leading the competition for optical crossconnects, also called "optical-electrical-optical switching" by UBS.

Levy of Lehman says no information he has indicates the government would be averse to picking a vendor for more than one category.

The second big RFP making the spotlight is the "Fiber to the Premises" project spearheaded by four RBOCs (see Fiber Access Plans Proliferate). Here, lips are sealed especially tightly (see Vendors Await FTTP Shortlist), but Lehman's note today says Alcatel SA (NYSE: ALA; Paris: CGEP:PA), Advanced Fibre Communications Inc. (AFC) (Nasdaq: AFCI), and a team-up of Motorola Inc. (NYSE: MOT) and Quantum Bridge Communications Inc. are probable shortlisters.

The surprise here is AFC, which Levy acknowledges hasn't been a high-profile name in passive optical networking (PON), the chief technology the RBOCs are evaluating. The vendor was thought to be a possible third-string choice by UBS in an evaluation last month (see UBS: Alcatel Could Win PON RFP).

Levy admits this shortlist may not stay that short. Nothing indicates, for instance, that the pairing of Optical Solutions Inc. and Nortel Networks Corp. (NYSE/Toronto: NT), once touted as a possible winner, is completely out of the picture. Like the GIG-BE, the FTTP RFP "won't be over till it's over," Levy says.

— Mary Jander, Senior Editor, Light Reading

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sevenbrooks 12/4/2012 | 11:33:32 PM
re: Analysts Narrow RFP Odds
Actually most RFPs are conducted under NDA. If vendors reveal information about the RFPs, then generally they are breaking the terms of the NDA.

seven
Mech4 12/4/2012 | 11:33:30 PM
re: Analysts Narrow RFP Odds As mentioned here awhile ago....not by me.

NT is not American, See any non-US cos. in these short lists?

These highly compensated analysts with "no sense" make sense to me.
litereading 12/4/2012 | 11:33:29 PM
re: Analysts Narrow RFP Odds don't suppose Lehman could be wrong about this. After all, how often have analysts been wrong about the telecom industry in the last five years?
skeptic 12/4/2012 | 11:33:29 PM
re: Analysts Narrow RFP Odds NT is not American, See any non-US cos. in these short lists?
------------
Alcatel was actually mentioned in the article.
But I agree that non-US companies have little
chance. Even US companies outside of a small
subset are unlikely to make much progress.

Cisco and Juniper managed, for example, to
get the router portions of the RFP defined in
such a way that anyone without a broad product
line (i.e. them) would be implicitly excluded.
This was, for example, bad for most of the
established edge router vendors.
oc-infinity 12/4/2012 | 11:33:28 PM
re: Analysts Narrow RFP Odds Nortel not making any part of this short list is only partly due to the fact that they are a Canadian-headquartered company. They still have a huge presence and employees in the USA, but that is not the only reason for their losses. They are losers in this project because they have totally squandered their lead in long-haul transport with non-starter products like LH5000, totally mismanaged the LH1600, and killed off nearly all the US based optical teams. They pretty much have exactly the same product lineup as four years ago, except for the DT. And the HDX has never suceeded in getting customer traction from paying customers, which is once again been demonstrated by losing the OXC position to Sycamore (Ciena was sure to be shortlisted with Coredirector).
wass 12/4/2012 | 11:33:21 PM
re: Analysts Narrow RFP Odds I agree. Analysts are just trying to get some sort of short term gain for the stocks. It's amazing to me based on the last two years scandals that there are any analysts employed anymore in this sector.

I would lend more credibility to bookies in Las Vegas, if they placed odds on who would win.

Hey, a new business idea!!!
captain kennedy 12/4/2012 | 11:33:15 PM
re: Analysts Narrow RFP Odds 1. Private RFP's are under NDA to protect the content of the RFP. The DISA RFP is free to the public. A reason why DISA/SAIC may tell Corvis to pipe-down is to allow the process to unfold. Afterall, there is still a lot of wages to be earned in completing this process. Do you think those in charge want the wage earners and wage payers to believe the process is a waste of time and money?

2. It appears the first two requirements to get into bake-off are (a) US based company (b) "Financially (read non pre-IPO) stable" company who can be in it for "the long-haul"
optical Mike 12/4/2012 | 11:32:53 PM
re: Analysts Narrow RFP Odds NT is not on the list (PON RFP) because they do not have a product to offer, it's that simple.
rjmcmahon 12/4/2012 | 11:32:49 PM
re: Analysts Narrow RFP Odds NT is not on the list (PON RFP) because they do not have a product to offer, it's that simple.

Does it also imply that the Canadians aren't taking PON seriously? Many from Canada do seem to be leading the way on our superhighway problem.
dodo 12/4/2012 | 11:32:48 PM
re: Analysts Narrow RFP Odds Many are working on the Broadband technology except for Nortel who sold its Access Business 21/2 years ago.

That's from the decision makers who thought that Optical Internet will bring in the greenbacks.

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