Ciena Targets Cable MSOs With 4350

Ciena Corp. (Nasdaq: CIEN) today announced a new Ethernet switch, the 4350, along with a new customer, Adelphia Communications Corp. (Nasdaq: ADLAC), which is using the CN 4350 to deliver video-on-demand (VOD) in Los Angeles and four other markets.

The CN 4350 Ethernet switch was built on the idea that switches at the edge of the network need fewer brains and more speed and stability. This may be just what cable operators -- probably the first triple players -- need for delivering high bandwidth, delay-sensitive applications like HDTV and VOIP.

The question is this: Can Ciena carve out a place at the edge of cable networks alongside the products of deeply entrenched incumbents, Cisco Systems Inc. (Nasdaq: CSCO) and Alcatel SA (NYSE: ALA; Paris: CGEP:PA)?

Ciena vice president of product marketing Gary Southwell says the 4350 will not compete by trying to displace Cisco or Alcatel boxes; rather, it will be marketed for use in next-generation initiatives built on top of an operator’s existing TV and data networks.

The strategy seems sensible. First, the 4350 is built more for speed than brains. “What they’ve done is designed a box purely for Layer 2 [Ethernet], not for IP routing or MPLS,” notes Heavy Reading analyst Scott Clavenna. “It’s designed around high-speed Ethernet forwarding that is consistent across all utilization levels and traffic priorities.”

This, Ciena says, will be essential for real-time “delay-sensitive” applications cable operators want to deliver. For applications such as HDTV, VOIP, and VOD, continuity in packet flow is the name of the game -- consumers simply will not tolerate interruptions to real-time calls or broadcasts.

Cisco's and Alcatel’s existing switches and routers have their merits, Clavenna says, yet they come with higher price tags and greater complexity of operation and management. “In many cases, they’re overkill for the cable space."

Clavenna says earlier Ethernet switches in the market have been known to begin dropping packets and interrupting traffic when utilization levels reach 60 percent.

"Previous generations of Ethernet switches were data-centric with real-time services glued on later," Ciena’s Southwell says. Southwell was VP of marketing at Internet Photonics, which was acquired by Ciena after having developed the concept and technology that eventually became the 4350 (see Ciena Buys More Than Catena ).

Cisco and Alcatel, whose equipment is already deeply entrenched in cable networks for handling more traditional data traffic, will obviously attempt to defend against the new Ciena 4350. Analysts expect them to do so by giving customer discounts as part of package deals.

Adelphia was the first cable operator to make use of the 4350; the device was used to help deliver VOD service to Los Angeles area subscribers beginning last August. Since then the devices have been installed to deliver the same service in Cleveland; Colorado Springs, Colo.; Waterbury, Conn.; and West Palm Beach, Fla.

The 4350 is also being used in Armstrong Cable networks to deliver video, voice, and data services in five states, according to a Ciena release.

In terms of the new product’s impact on Ciena’s overall performance, the company's stock price probably won’t offer a true reflection anytime soon, say some analysts. Its price has risen by 30 percent for the first week in December "without material fundamental news to support the move," says Morgan Keegan & Company Inc. analyst Simon Leopold.

Leopold anticipated today’s product announcement but said that, even if the product is a success, the valuation of the stock remains expensive.

— Mark Sullivan, Reporter, Light Reading

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