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Ciena Shrinks Its Hot CN 4200

Ciena Corp. (NYSE: CIEN) finally scored a hit, but is it enough to base the company's future on?

The CN 4200, now a year old, is drawing rave reviews from analysts while racking up design wins, mostly in Europe. The box is finding a comfortable niche that overlaps the DWDM and multiservice provisioning platform (MSPP) markets. And Ciena is convinced enough of the platform's success to roll out a smaller version, the CN 4200 MC, earlier this week. (See Ciena Launches Mini CN 4200.)

The new box, unveiled May 15, sports a 32-Gbit/s switching capacity and two 10-Gbit/s ports for uplink. It uses the same linecards and software as the 4200, as well as some new cards tailored for the MC's lower-speed markets.

The numbers on the 4200 are small -- $2 million in revenues last quarter, estimates analyst Tim Daubenspeck of Pacific Crest Equity Partners Inc. But it's the kind of start Ciena hasn't seen from a product in years, although it might be premature to declare Ciena has found its next franchise system.

"I hear whispers that it could do $150 million in fiscal 2007, which seems aggressive compared with our expectations," Daubenspeck says. "But there's no question this is their most successful acquisition."

Ciena hasn't spelled out revenues for the 4200, but the box is the company's "fastest growing product," says Vinay Rathore, Ciena's director of segment marketing. Keep in mind, though that it started from a base of zero a year ago.

Still, analysts say the 4200 is the thing Ciena most wants to talk about these days -- and why not? Among six acquisitions between 2000 and 2004, Ciena's successes are scarce. The $2 billion pickup of Cyras Systems and $900 million purchase of ONI Systems were scrapped in a 2004 restructuring. And Catena -- Ciena's $480 million foray into the access network -- has been a disappointment. (See Ciena Buying Binge Alarms Analysts, Ciena Cuts 1/4 of Staff, and Ciena Backs Off BLCs.)

Amid all those big deals, Ciena snuck in the $150 million all-stock purchase of Internet Photonics. Overshadowed by the Catena deal announced on the same day, the purchase netted Ciena the CN 4200 and its most promising new platform. (See Ciena Buys More Than Catena and Ciena Claims DWDM Coup.)

The 4200 has racked up more than 40 customers, 54 percent of which are service providers, Ciena says. Those ranks include BT Group plc (NYSE: BT; London: BTA), which included the 4200 and other Ciena products in its 21 CN project, and a bevy of smaller European carriers. And while the 4200 recently found a fit with cable provider Cox Communications Inc. , it has yet to score in U.S. RBOCs' networks. (See Ciena Finalizes BT Agreement and Cable Tuning In Ciena DWDM.)

Ciena claims that's a byproduct of the 4200's obsession with the Optical Transport Network (OTN), specified by the International Telecommunication Union (ITU) G.709 standard. Known as the "digital wrapper," G.709 -- a relic of the bubble days -- is catching on, but mostly in Europe rather than in North America.

"The RBOCs have only recently gotten on the OTN bandwagon," Rathore says -- although he notes that requests for proposals (RFPs) requiring OTN are becoming more common. "We're engaged with all the RBOCs."

Part of the CN 4200's early success is based on timing, with the CN 4200 arriving during a growth spurt for many metro networks. But Ciena also scored a hit with the system's key feature, the ability to push any service -- Ethernet, Sonet, whatever -- to any port arbitrarily.

"That is pretty impressive," says Sam Greenholtz, an analyst with Telecom Pragmatics Inc. "You might have to change a couple of cards around, but nothing major. It sort of eliminates the engineering snafus."

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njguy 12/5/2012 | 3:53:41 AM
re: Ciena Shrinks Its Hot CN 4200 The 4200 was entirely done by the Internet Photonics team in NJ. Ciena's saying that it was in house because they layed off the entire NJ team in March, suddenly and without transitioning things.

So you can call it an acquisition success, but I'm not sure they can follow up in a timely manner.
Pete Baldwin 12/5/2012 | 3:53:41 AM
re: Ciena Shrinks Its Hot CN 4200 Here's a thought: Scott Clavenna notes the CN 4200 is more an in-house project than an Internet Photonics one.

Internet Photonics was more about Gigabit Ethernets and WDM... things like OTN and the flexible ports (the two features that make the 4200 stand out most) didn't come til later.

So -- do we get to count this as an acquisition success?

More important -- what do folks think of the 4200 and its place in Ciena? Would Ciena do well to make this the flagship box for the company's next phase in life?
jes 12/5/2012 | 3:53:41 AM
re: Ciena Shrinks Its Hot CN 4200 MSPP is a crowded with lots of vendors... what are the features which Ciena 4200 has which makes it different from the traditional MSPP's ? MSPP market has some biggies with Fuji, Cisco, Lucent, ALA etc.. how is Ciena doing inthat area ?Any comments !
Maxplanck 12/5/2012 | 3:53:40 AM
re: Ciena Shrinks Its Hot CN 4200 Scott Clavenna is mistaken. The CN4200 is 100% an IPI project. The chassis as well as the software, hardware, and control architecture all predate the Ciena acquisition. The flexible ports were developed at IPI. The post-Ciena developments such as the OTN capability and the 10Gb/s ports were all done by the same IPI staff in Shrewsbury, N.J., with little involvement from Ciena.

The IPI Shrewsbury operation was abruptly shut down in March, as work on the next major release was getting underway. Several critical software people were offered relocation to Md. but (evidently to Ciena's surprise) none accepted. A few IPI engineers were kept on for a month or two to attempt to transition the work to Linthicum. The others were let go immediately, with no warning. The remaining Ciena people, in Md. and Ottawa, with no previous involvement in the CN4200, have been frantically trying to understand and take over the development of this product that was dropped in their laps.

Acquisition success? In the short term, and to outside observers, absolutely. That is, if one can ignore the moral stain that Ciena has acquired from sacking the entire team responsible for its most successful recent product.

In the long term, they will fail. The remaining Ciena engineers do not know enough to deliver this product to customers on schedule or to support it; their managers have no idea how much they do not know.

IPI was the goose that laid the golden egg, and Ciena killed it.
tobeit 12/5/2012 | 3:53:40 AM
re: Ciena Shrinks Its Hot CN 4200 I am not an insider on that topic, but I like to understand your comment. Do you mean that they layed off the IP team in NJ, which developed (most/part) of the 4200 box?
ATMRules 12/5/2012 | 3:53:39 AM
re: Ciena Shrinks Its Hot CN 4200 Well, if they shutdown IPI in NJ, then how long will it be till Ciena gets around to the WaveSmith folks in Acton? The DN 7000 ATM/FRame Realy product has sold well into SBC/Verizon with a couple of other small customers but that's it. You do not see any news about any wins with this product except for the Verizon one which was about 2 years ago, also considering that a good part or the original WS team has migrated to BlueNote Networks it looks like it's just a matter of time for them..

ATMRules.................
Maxplanck 12/5/2012 | 3:53:39 AM
re: Ciena Shrinks Its Hot CN 4200 A few of the Acton people were already laid off in December, right before Christmas. The employees were informed in Ciena's typically clumsy manner: they came in to work and found an automated email announcing that a pay check had been deposited, although it was not a regular pay day. Opening the PDF of the check stub, they found a notation that this was severance pay.
brahmos 12/5/2012 | 3:53:39 AM
re: Ciena Shrinks Its Hot CN 4200 their website shows scant few open engr reqs in north america and nearly 50 in gurgaon a suburb of delhi where their offshore center is located.

http://www.ciena.com/careers/J...
lpskeptic 12/5/2012 | 3:53:38 AM
re: Ciena Shrinks Its Hot CN 4200 Siemens bought a metro optical company in China two days back. Price rumored to be in tens of millions. Am surprised LR has nothing on this?
LightCycle 12/5/2012 | 3:53:37 AM
re: Ciena Shrinks Its Hot CN 4200 IMHO, Siemens got hoodwinked, they bought a lemon. Check out some of the prior message board posts on PB.

http://www.lightreading.com/bo...

As for Ciena... the title of this Article should read "Ciena shrinks" period :)
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