A pan-European contract win announced by Ciena Corp. (Nasdaq: CIEN) is small potatoes, analysts say. And even if it leads to a larger deal, it's ultimate value remains to be seen.

Ciena announced this morning that it plans to supply its MultiWave Sentry 4000 DWDM (dense wavelength-division multiplexing) transmission systems to privately held Interoute Telecommunications for voice and data connectivity in Germany, the Netherlands, and the U.K.

Ciena refuses to publicly disclose the value of the deal, but analysts say they've confirmed that it's not much. "This is a small deal, worth less than $10 million," says Jafar Rizvi, an analyst with Sands Brothers & Co. Ltd.. "I don't think it's of much comparable value."

Others agree. "This doesn't seem like a big deal at all. I don't have any idea why Ciena's doing business with a pan-European carrier anyway," says Ariane Mahler, analyst with Dresdner Kleinwort Benson. In her view, the prospects for pan-European carriers are bleak these days, because they aren't making enough money to justify the enormous expenditures on their "gold plated" fiber networks. That in turn makes them unable to sustain their cash flows through the crucial stages of early deployment. It adds up to an unreliable bet for most vendors, she says, who'd be better off courting more established PTTs in Europe.

But two elements of today's deal could make it worth a second look. For one thing, Interoute is backed by the Sandoz Family Foundation, one of Europe's largest private family funds. That's good news, since private funding improves Ciena's prospects of getting paid for its equipment. In contrast, carriers that rely solely on public markets are being "left to go bankrupt," says Mahler.

Another plus about today's deal is that it could lead to a bigger one for Ciena. That's because Interoute is in the process of installing a much larger pan-European fiber optic network called i-21, which will encompass eight rings in nine countries, covering 46 cities and 14,500 kilometers by its completion in mid-2001. If Ciena can get in on that network -- and sources at Ciena confirm that it's trying to do just that -- the value of its relationship with Interoute could skyrocket. "The i-21 contract could be as big for Ciena as its deal with Cable and Wireless," says Jordan M. Estra, analyst with Ryan Beck & Co.

All told, though, today's deal looks more like a promise of future efforts than a guarantee of present success. And in that respect, it echoes several recent rumors about Ciena contracts (see Ciena Surges on Deal Rumors).

"There's been a lot of good potential news that never materializes," Mahler says. For instance, Ciena says it's still "attempting to finalize" a hoped-for deal with Williams Communications Group (NYSE: WCG). And earlier this fall, Ciena reportedly was hot on the trail of a deal with AT&T Corp. (NYSE: T) -- only to apparently lose out to NEC Corp. (Nasdaq: NIPNY) last month. The reason was said to be that NEC was able to offer a 160-channel DWDM system, while Ciena was only able to offer 96 channels.

According to Ciena spokespeople, however, the paucity of channels will soon be rectified. They say the vendor is "on the verge" of releasing a 160-channel system, with a maximum per-channel capacity of 10 Gbit/s.

Ciena's stock was down over a point today, trading at $89.09 by midafternoon.

-- Mary Jander, senior editor, Light Reading http://www.lightreading.com