Optical/IP Networks

China Deals Brighten Lucent's Day

Lucent Technologies Inc. (NYSE: LU) pulled down a big chunk of today's China windfall (see Vendors Bag Monster Chinese Deals), as it won $350 million in contracts with China Unicom Ltd. and China Telecommunications Corp. (NYSE: CHA)

The timing couldn't be better for Lucent, which was still smarting from its bitter defeat in the federal government’s GIG-BE sweepstakes (see DISA Deal Is Done). The deal also vitiates recent observations that tension has been rising between Lucent and Juniper Networks Inc., because of Juniper's strategic partnerships with other vendors and Juniper's own direct sales efforts.

Lucent executives say the Juniper partnership was crucial to deals with China Telecom and Unicom. In fact, a Lucent executive says the joint development has resulted in some proposed standards that Lucent plans to introduce to the MPLS/Frame Relay Alliance.

John Sax, CTO of Lucent’s Data Networking group and general manager of the Lucent/Juniper partnership, says carriers are calling for multiservice convergence gear, but the standards aren’t quite there yet. Sax says Lucent and Juniper had to do prestandard work on the China Unicom and Telecom projects.

"There are existing standards, but there are flaws because the MPLS Forum versions doesn’t really allow you to scale," says Sax. "Routers and ATM switches have completely different architectures. We pointed out... that routers should do routing and ATM switches should do ATM switching."

Sax says Lucent is more than a Juniper reseller. "The partnership is a joint development partnership. We’ve worked on solving the problem of how you do that... combining Layer 2 and Layer 3, which is actually very complicated.”
It's still clear, however, that without its own routers, Lucent will have to keep a tight rein on the Juniper relationship. And Juniper still sells through many of Lucent's competitors.

The talk of Lucent's tricky positioning in the IP router space flared up again last week, when Nortel Networks Corp. (NYSE/Toronto: NT) struck a deal with Avici Systems Inc. (Nasdaq: AVCI; Frankfurt: BVC7) to pursue opportunities in the carrier routing market (see Avici, Nortel Get 'Strategic'). Industry sources said one of the factors driving the deal was that Nortel was unhappy with the fact that Juniper had deals with so many of Nortel's competitors, including Lucent, LM Ericsson (Nasdaq: ERICY), and Siemens AG (NYSE: SI; Frankfurt: SIE).

"There is channel conflict," says Frank Dzubek, president and CEO of Communications Network Architects, a consultancy, of Juniper's multi-partner approach. "Juniper has used channels for distribution, and now they're becoming their own direct distributor."

Juniper officials have downplayed the channel conflict, saying they'll strike the proper partnerships where appropriate.

Meanwhile, Lucent and Juniper may be happy to split the kitty on this $350 million deal. The contracts between Lucent and the two Chinese service providers cover a range of wireless and wireline networking gear to build high-speed mobile data access, video-on-demand, and IP Centrex services. Lucent, as the primary contractor, will be the major beneficiary, though Juniper stands to get an undisclosed sum as a sub-contracor and partner.

— R. Scott Raynovich, US Editor, Light Reading

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