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Ciena Fleshes Out Sprint Deal

Light Reading
News Analysis
Light Reading
6/25/2002

Ciena Corp. (Nasdaq: CIEN) announced Tuesday that Sprint Corp. (NYSE: FON) has purchased and deployed its CoreDirector optical switches in more than 20 cities. The equipment vendor also says Sprint has ordered its MetroDirector K2 metro switch for deployment this summer (see Sprint Picks Ciena Switches).

The announcement may have only limited upside for Ciena. Sprint's CoreDirector switches have already been installed and Ciena has already booked the revenues. The deployment process started late in 2000 and extended throughout 2001, according to Bob Azzi, VP of network services engineering at Sprint.

"We're still deploying one or two here and there where we need them," he says.

"We're using [CoreDirector] as a combination crossconnect, add/drop multiplexer, and optical switch." The combination of those functions in the core is important, Azzi says, because within the same year of deployment Sprint has realized almost immediate capital spending savings in its buildouts for new transport routes internationally.

While Sprint's CoreDirector deployments aren't new, what is new are its orders for Ciena's K2, a metro switch that combines digital crossconnect, ATM access switch, Ethernet switch, Sonet add/drop multiplexer, and DWDM terminal functions.

That part of the deal is good news for Ciena, in that it is finally seeing some action from the K2 product. Sprint says it chose Ciena's K2 product after looking at comparable offerings from Alcatel SA (NYSE: ALA; Paris: CGEP:PA), Nortel Networks Corp. (NYSE/Toronto: NT), and Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA). "We had some familiarity already with the K2 and found it met our needs the best," says Azzi.

Azzi says Sprint is using the K2 in five domestic sites that terminate international data traffic. He says it's "not a huge deployment" but doesn’t know exactly how many K2 boxes Sprint will end up ordering.

"The European market has been a really good opportunity for Sprint because of some of the market changes there and some of the bankruptcies that have occurred over there," Azzi says. "We had some growth requirements for our gateway [sites] to our international markets and [the new equipment buys] are augmenting that capacity."

Ciena officials said that the news shows evidence of Ciena extending its customer relationships to multiple products.

"What's different about Ciena is that now we can bring a broad portfolio of products to our accounts," says Denny Bilter, Ciena's senior director of marketing. "That's what we're showing here."

On Wall Street, the deal didn't buoy investors, who are still waiting to see how Ciena's restructuring fares. It's likely that many investors already realized that many of the sales related to the Sprint contract had either been realized as revenue or already built into the forecast. Ciena shares dropped $0.26 (6.33%) to $3.85.

Some Wall Street analysts indicate that the amount of ongoing revenue being delivered from the Sprint project would change the big picture.

"We believe this project is already reflected in Ciena’s forecasts," wrote Merrill Lynch & Co. Inc. analyst Simon Leopold, in a note to clients on Tuesday. "We continue to expect additional restructuring, as the operating expenses remain too high given our expectations for the sales level."

Last week, Ciena predicted lower than expected quarterly revenues and said it would fire 335 employees and close its metro switching headquarters in Fremont, Calif. (see Ciena to Merge, Shrink).

— Phil Harvey, Senior Editor, Light Reading
http://www.lightreading.com

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scooby
scooby
12/4/2012 | 10:13:06 PM
re: Ciena Fleshes Out Sprint Deal
The ground must be looking awfully big in the windshield if the pilot is frantically pressing the Sprint button. Here's a tip - dig out the survival checklist. Pulling back on the stick is a recommended solution - trade some speed for altitude.

Or the CEO should read the note in the third envelope... "Make three envelopes."
Gig girl
Gig girl
12/4/2012 | 10:13:02 PM
re: Ciena Fleshes Out Sprint Deal
Things are really getting bad at Ciena if they have to resort to bragging about the K2. Ciena is not even having good results internationally with the K2. On a European "win" the customer began the install of the K2, hated it so much that they shipped the lot back to the US still in the crates and reopened the tender.

Ciena has/had competencies in DWDM, they don't know TDM and it's showing in the Cyras kludgeGǪ "a metro switch that combines digital cross connect, ATM access switch, Ethernet switch, SONET add/drop multiplexer, and DWDM terminal functions". The "god box" was never viable, get over it. You can't cost it in, the technologies and physics conflict, it can't be managed in the network.

Density, lower OPEX, integration into existing networks, cost effective new services. It may not be sexy, but it supports the bottom line for the service providers. Like Mom saidGǪ there are girls you date and girls you marry.
pkumar
pkumar
12/4/2012 | 10:13:01 PM
re: Ciena Fleshes Out Sprint Deal
Now CIENA has Metro MSPP from ONI system. Do they care if K2 MetroDirector is not well accepted in the market place
Light_Path
Light_Path
12/4/2012 | 10:12:56 PM
re: Ciena Fleshes Out Sprint Deal
How many Cisco 15454 and 15327 are going into Sprint's domestic network? I am willing to bet that Cisco/Sprint alliance will keep the K2 out of North America. The K2 cannot do half of what the Cisco/Cerent 15454 can do with TDM and ethernet.
Mary Jander
Mary Jander
12/4/2012 | 10:12:49 PM
re: Ciena Fleshes Out Sprint Deal
Sprint's selection of an existing DWDM provider for metro switches begs the question as to whether the carrier's playing it safe and sticking with a known supplier. Any thoughts in that direction, anyone?
Opty-Op
Opty-Op
12/4/2012 | 10:12:49 PM
re: Ciena Fleshes Out Sprint Deal
Light Path - it was my understanding that the K2 has better density and more line options then the 15454. Could you further explain your comment the K2 cannot do half of what the Cisco/Cerent 15454 can do with TDM and Ethernet?

The latest information I had was that the 15454 still cannot switch in under 300ms, the DWDM optics are passive, the new chassis cannot pass NEBS Level 3 which means no deployment for single wide 192s, Gig-E still actually 1/2 Gig-E (I understand this will be fixed when 3.0 is solid) and 3.0 has not been deployed at any carrier.

K2 has been in stealth mode until now so there isn't a lot of info about it besides the marketing slicks from the website. Your more detailed comparison to explain the difference is much appreciated.

Light_Path wrote:

How many Cisco 15454 and 15327 are going into Sprint's domestic network? I am willing to bet that Cisco/Sprint alliance will keep the K2 out of North America. The K2 cannot do half of what the Cisco/Cerent 15454 can do with TDM and ethernet.
netskeptic
netskeptic
12/4/2012 | 10:12:48 PM
re: Ciena Fleshes Out Sprint Deal
I am sorry for naive question, I was not able to locate any info about total throughput of 15454, can you give any idea ?

Thanks,

Netskeptic
BobbyMax
BobbyMax
12/4/2012 | 10:12:47 PM
re: Ciena Fleshes Out Sprint Deal
Ciena paid about $4.4 Billion dollars for K2 product that it acquired from Cyras. It was acquired by Ciena in spite of objections from several quarters.

The company was essentially a foreign company that has learnt from Cerent that there is no ethics. Cyras misrepresented its K2 product. It padded the number of engineers as Cyras wanted to be acquired as the company would not have ben able to sell its products.

Ciena has made the same error of judgement in acqusition of ONI. If Ciena does not give its negotiatins secret, it can get a lot of feedback.

One would think that the acquisition model practiced by Cisco,Lucent and Nortel simply does not work.

Ciena is a financially a very weak company and as a result many carriers would be very reluctant to buy from it.

It is very risky to buy any product and technology from companies in California. California essentially has become a third world country. It is very difficult to trust the companies located in California.
Mech4
Mech4
12/4/2012 | 10:12:47 PM
re: Ciena Fleshes Out Sprint Deal
Put down the kool aid....

I think it is the other way around as 454 is about half of the K2. Cisco never got much more than ds3 and oc48 working and probably won't.
Mech4
Mech4
12/4/2012 | 10:12:47 PM
re: Ciena Fleshes Out Sprint Deal
Yes, they care.... ONI's stuff is strictly regional/metro DWDM transport. No MSPP stuff. Maybe they were developing but you can bet it will be shut down now.
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