AT&T Deal Boosts Avici
Yesterday the company announced availability of the higher-speed OC192c interface, but today came the real news for investors -- Avici had already landed a major customer for its TSR core Internet router. AT&T Corp. (NYSE: T) said today that it’s running live traffic over its nationwide OC192 backbone using Avici’s router as the cornerstone.
The news that AT&T is using the OC192 capability of Avici routers sent Avici's stock up $6.44 (32.59%) to 26.19 in trading today.
Avici’s channelized OC192 interfaces, which became available in the third quarter of last year, are now carrying live traffic among Boston, Chicago, Los Angeles, New York, St. Louis, and San Francisco.
“It’s a tier one network,” says Seth Spalding, director at Epoch Partners. "And that’s a big deal. They’re one of the only carriers actually carrying live OC192 traffic. They aren’t using Juniper, and they didn’t wait for Cisco to get there.”
According to estimates by Epoch Partners, the deal is worth approximately $5.2 million.
"They are well on their way toward hitting the $9 million in revenue we predicted for the quarter ending in March,” adds Spalding. This announcement follows yesterday’s announcement regarding the availability of OC192c (concatenated) interfaces (see Avici Intros OC192 Line Card). Now the company will offer both channelized and concatenated interfaces.
What’s the difference between channelized and concatenated? Channelized interfaces consist of four separate OC48 channels each running at 2.5 Gbit/s muxed together in an OC192 pipe, while the concatenated version is a solid OC192 pipe with one channel running at speeds close to 10 Gbit/s. Each implementation has its own benefits. The channelized implementation can hook into existing OC48 gear, while concatenated pipes require special faster gear. On the flip-side, concatenated pipes are better for carrying higher bit rates of traffic.
“Right now we are using the channelized OC192 interfaces,” says William Hoffman, a spokesperson for AT&T. “But we plan to also use the concatenated interfaces when they become available in volume. We had a very robust bake-off selection process, and Avici came out on top.”
While only the largest of backbone providers are ready for OC192 interfaces right now, it’s clear that service providers are looking for a clear growth path, says Pete Chadwick, VP of marketing for Avici.
“For a certain class of customers, it’s becoming another checklist item,” he says. “It’s going to take some time before OC192 is the predominant backbone speed, but you can’t get through the evaluation process without it.”
So, where is routing market leader Cisco Systems Inc. (Nasdaq: CSCO) with its OC192 development? The company says that it’s on target to deliver OC192 interfaces by the end of this quarter (see Volpi Downplays Cisco Concerns).
But Cisco is already suffering the consequences of not being first to market. In the latest report issued by The Dell'Oro Group, Juniper Networks Inc.'s (Nasdaq: JNPR) core and edge router market share grew from 22 percent in the previous quarter to 29 percent from July through September 2000 (see Juniper Eats Into Cisco's Lunch). Coincidentally, Cisco’s market share was down from 72 percent in the previous quarter to 68 percent in the third quarter of 2000. Such changes have been attributed, in part, to Juniper’s OC192 offering.
"OC192 has been one of the most important growth drivers for Juniper from September to December,” says Paul Johnson, senior technology analyst for Robertson Stephens. "IP traffic aggregates pretty quickly, and its going to become increasingly more critical to support.”
Avici will now compete head to head with Juniper. But Avici and some analysts are quick to point out differences between the two products.
“The fact that Avici has a more scaleable architecture than Juniper’s fixed configuration is why they were considered exclusively by AT&T,” says Spalding. “That’s why the stock is up 20 percent today. "
While the stock rallied around good news today, analysts point out that the insider lockup period for Avici shares ends January 23, which could flood the market with new shares and cause some price weakness.
-- Marguerite Reardon, senior editor, Light Reading, http://www.lightreading.com