Avici Not in on China Deal
Huawei Technologies Co. Ltd. says its contract to build phase one of China Mobile (Hong Kong) Ltd.'s (NYSE: CHL) next-generation IP backbone is for its own core routers only and doesn't include gear from OEM partner Avici Systems Inc. (Nasdaq: AVCI; Frankfurt: BVC7). (See China Mobile Picks Huawei.)
Avici had prospered from Huawei's other recent core router deal with China Telecommunications Corp. (NYSE: CHA). (See Huawei Partnership Boosts Avici .) In that deal, the Chinese vendor supplied 10 NE5000s, the name Huawei gives to Avici's SSR core router.
So when Huawei announced the deal with China Mobile, analysts wondered whether Avici would benefit again. But Huawei spokesman Richard Lee says, "In this deal, they are all Huawei high-end routers." He wouldn't disclose the value of the contract.
Avici wouldn't answer questions on the matter, saying it doesn't comment on other vendors' customer activity as a matter of company policy.
Analysts at Lehman Brothers, while unsure whether Avici was getting any of the action, stated in a research note that Huawei's deal could have more of an impact on Juniper Networks Inc. (Nasdaq: JNPR).
"We note that Juniper has been an incumbent core routing vendor to China Mobile, and we view this announcement may be perceived as an incremental negative for Juniper." But the analysts reckon Juniper's business is holding up in China, despite increasing competition from local vendors such as Huawei. "Our field checks suggest Juniper's business in China this quarter appears to be on track, helped by continued solid traction of its E-series edge routers."
Huawei, perhaps not surprisingly, has a strong supplier relationship with China Mobile, which earlier this year opted to deploy the Chinese vendor's softswitch (see China Mobile Picks Huawei Softswitch).
China Mobile had not responded to questions regarding the contract award by the time this article was published.
— Ray Le Maistre, International Editor, Boardwatch