& cplSiteName &

DISA Deal Is Done

Light Reading
News Analysis
Light Reading
12/31/2003

The Defense Information Systems Agency (DISA) confirmed yesterday that Juniper Networks Inc. (Nasdaq: JNPR), Ciena Corp. (Nasdaq: CIEN), Cisco Systems Inc. (Nasdaq: CSCO), and Sycamore Networks Inc. (Nasdaq: SCMR) have won the equipment portion of the Global Information Grid - Bandwidth Expansion (GIG-BE) project, a network expansion potentially worth hundreds of millions over the next couple of years (see Gov't Names GIG-BE Winners).

Light Reading first reported in September that these same equipment vendors were on the final list (see GIG-BE Winners Named).

GIG-BE, in case you spent 2003 living in a missile silo, is an advanced defense network designed to "supply the Warfighter with reliable and secure transmission facilities for today and tomorrow's voice, video, data, and imagery systems as required," according to the original request for proposal (RFP).

The Winners

GIG-BE suppliers include Ciena for its long-haul optical transport systems; Sycamore, for its optical digital crossconnect (ODXC) gear; Juniper for its IP routers, both in the core and edge of the network; and Cisco for its multiservice provisioning platforms (MSPPs). (See Ciena Announces GIG-BE Win and Juniper Wins GIG-BE Contract.)

Science Applications International Corp. (SAIC), was the company DISA used to pick the winners and conduct the equipment interoperability tests at the AT&T Labs in New Jersey.

Two of the vendors bid their wares through partners. Sycamore teamed with Sprint Corp. (NYSE: FON) and Cisco with Qwest Communications International Inc. (NYSE: Q). Neither pairing is surprising, say sources close to both companies. For one thing, going through the contracting partners ensured that the government wouldn't be doing business with a first-time supplier on a project seen as highly important to national security.

To wit, Sycamore needed a partner with previous government contractor experience. Cisco, for its part, stuck to its usual modus operandi of always going through a reseller when dealing with federal business, mostly to avoid having to get into complex services and support arrangements.

"Cisco likes to throw gear over the wall and have the government throw money back," says a consultant close to the GIG-BE process.

Partnering with Sycamore was a good deal for Sprint, one source says, because it gave them a chance to get back some of the business they'd lost to Level 3 Communications Inc. (Nasdaq: LVLT) when the fiber and circuitry bits of GIG-BE were awarded (see GIG-BE Fiber Contracts Awarded and Who's Got GIG-BE Fiber?).

The Losers

Lucent Technologies Inc. (NYSE: LU) and Corvis Corp. (Nasdaq: CORV) appear to be wearing the most egg on their faces now that the GIG-BE winners have been officially named. Lucent was a finalist in every equipment area except for IP routing and lost in each area, according to Light Reading sources.

"While we will not be a part of this project, we look forward to further opportunities with the government," says a Lucent spokeswoman.

Corvis, the only vendor to publicize being involved in the DISA selection process, was shamed twice: it wasn't acknowledged by DISA at the time and it wasn't named as a winner later on (see Corvis Solo in Bake-Off Boast).

Cisco and Ciena both walked off with split decisions. Ciena was bested by Sycamore in OXDCs, but triumphed in the long-haul category. Cisco, however, won in MSPPs, but lost in the area where it holds the majority of the worldwide market share -- IP routers.

The Kitty

The deals have the biggest impact for Juniper and Sycamore, two of the smallest companies in the bidding. Juniper stands out because it won all of the IP routing business against larger competitor Cisco. For Sycamore, who's quarterly revenues have dipped below $10 million per quarter, it will provide a much-needed boost in its core business of optical switching.

"To win all of the IP routing portion of GIG-BE is a home run for Juniper," says Dubhe Beinhorn, vice president for Juniper's Federal Systems division.

A call to Cisco wasn't returned by press time.

At the high end, Lehman Brothers estimates that this crop of winning vendors could pull down as much as $510 million in revenues from the GIG-BE opportunity in the next two years.

Table 1: GIG-BE Revenue Estimates

Company Anticipated Opportunity Timeline
Ciena $160M Through year-end 2005
Cisco $100M to $150M Through year-end 2005
Juniper Networks $100M to $150M Split between 2004 and 2005, with about $4M to $6M coming in 1Q04
Sycamore Networks $75M to $100M Through year-end 2005
Source: Lehman Brothers


"This is a multiyear contract, but DISA states clearly that most of the equipment will be deployed in the next 24 months," says Beinhorn. "That's why these government contracts are so attractive... They have a material impact on the companies involved."

The shares of all GIG-BE winners rose in early afternoon trading on Wednesday, with the exception of Cisco, which was down slightly. Sycamore is the big gainer so far, rising $0.69 (14.94%) to $5.34.

Table 2: GIG-BE Stock Impact
Company Price Price Change % of Change
SCMR $5.38 Up $0.73 15.80%
CIEN $6.45 Up $0.35 5.74%
Q $4.32 Up $0.15 3.60%
JNPR $18.77 Up $0.26 1.40%
FON $16.39 Up $0.13 0.80%
CSCO $24.03 Down $0.09 0.37%
Prices as of 12/31/2003, 12:35 EST
Source: Light Reading


— Phil Harvey, Senior Editor, Light Reading

(22)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
Page 1 / 3   >   >>
andropat
andropat
12/5/2012 | 2:47:16 AM
re: DISA Deal Is Done
Hey fw23,

this should boost junipers market perception a bit, huh? What is even sweeter about this deal is that juniper not only won core but edge as well. Poor cisco! I am sure chambers will be in a jet soon if not already begging and pleading for the business. The good thing unlike most is that the feds won't buy his crap and change their mind as a result.

Looks like 2004 will be great for juniper. I am pumped for sycamore as well. they just hang in there and win deals.

Pat
literight
literight
12/5/2012 | 2:47:14 AM
re: DISA Deal Is Done
fw23's Superbowl commercial advice pays off, LOL!
beowulf888
beowulf888
12/5/2012 | 2:46:59 AM
re: DISA Deal Is Done
Calm down, everyone! Responding to the BoobyBot is a waste of everyone's time. He's just a LR 'bot that sends out trolls to stimulate arguments on the list. BoobyMax fails the Turing Test, though...

In response to flames being thrown...

>you know, shut the hell up

>>Wow, I bet your kids love you!

cheers!
--Beo
gzkom
gzkom
12/5/2012 | 2:46:59 AM
re: DISA Deal Is Done
Be professional !
optobozo
optobozo
12/5/2012 | 2:46:44 AM
re: DISA Deal Is Done
Despite fw23's and Light Reading's protestations, Juniper seems to continue winning more business. I recall that article where LR mentioned the word on the street (Tazman Ave?) was that JNPR was practically shut out of Verizon ( http://www.lightreading.com/do... ) . Was the source "close to Juniper" fw23? There is a rather large 7-month gap in postings centered around the article date. ;-)

I guess the government must have been left out of the Heavy Reading research questionnaires.

Regardless of who wins what, it's nice to see engineers continue to be employed. It's better than the dole. I'd rather see the money go towards a room full of engineers' salaries (and a better product) than in a useless SuperBowl commercial that gets forgotten in an alcohol-induced haze.

I'm sure the decision makers remember the personal phone calls and/or visits from Chambers, Desh, Dolce, et al, more than the flashy vid. Strom Thurmond's former constituents were asked what they remembered about him - it was the personal phone call on their birthday, spouse's passing, etc. "He was a nice man, so I voted for him." they said. They didn't exactly recall what he stood for.

fw23, you sound bitter. If Juniper is so evil, it will crumble on its own schedule. If Procket rockets or gets absorbed by Cisco Borg, it will happen beyond our control. Or if Alcatel convinces us all that we only care about Layer 2, it will happen because they made it happen. Until then, methinks thow dost protest too much. Your bitterness will not be resolved by your posts.
kongfromhk
kongfromhk
12/5/2012 | 2:46:37 AM
re: DISA Deal Is Done
Juniper is on its way down. The Indians are firing white americans and whites in turn are firing Indians. The VP of engineering who is an Indian psycho egomaniac is shipping all jobs to India and the quality of their products are obviously going to suffer in the long run.
puddnhead_wilson
puddnhead_wilson
12/5/2012 | 2:46:03 AM
re: DISA Deal Is Done
what is your source for Ciena bidding LH at a loss. I confess I do not know myself, but I do have some contacts there that would probably at least get teh scent that this is the case, and this is not what they are telling me. Yes, they will not get fat margins on the LH, and yes, they had hoped to get the crossconnect award too, but I have never heard -- before the award OR since -- that their LH bid was predicated on getting it!

Furthermore, what I have heard jives with what the two independent sources that LR cited back in September (linked in this article) apparently said, while your comments do not (aggressive pricing was cited as a facotr only for crossconnects & not at all for LH, you would think they would have mentioned it if it was the case there too). Given how dead on that September piece was, even without my own murky knowledge & would still question what you have said. If this is anything more than wild speculation on your part, please explain.
dave77777
dave77777
12/5/2012 | 2:45:42 AM
re: DISA Deal Is Done
Go back and read the (non-LR) analyst comments at the time. It was reported in more than one place that they bid LH low expecting to make it up on cross-connects. Here's what Prudential has to say:

This morning lightreading.com, a networking industry news site, reported on the unoffical results of the U.S. government's GIG BE contract (Global Information Grid Bandwidth Expansion). We spoke with one of the primary vendors involved, and they indicated that the article was largely correct.
Cisco (CSCO, $20.47, Overweight rated) appears to have won the Multiservice Provisioning Platform (MSPP, aka next-gen SONET) portion of the contract with its highly successful ONS 15454. We believe Cisco has also won the edge
routing portion of the contract (with its GSR 12000 and 10000 series routers);
however, it appears Juniper (JNPR, $17.07, Neutral rated) won at least the
majority of the core portion (with its T-640 and/or T-320 routers).
While Cisco has a strong government business, Juniper's high-end core router portfolio has generally better specs. than Cisco's 12400 core router series.
As expected, Ciena (CIEN, $6.73, Not rated) won a major part of the contract in
the optical transport portion (with its CoreStream DWDM product). Our contact
we spoke with this morning says that Ciena discounted 90% on the transport portion in anticipation of winning the higher-margin digital cross connect portion. However, Sycamore (SCMR, $4.76, Not rated) appears to have won the digital cross-connect contract over Ciena (Sycamore's SN 16000 vs.
Ciena's
CoreDirector). We believe Corvis (CORV, $1.40, Not rated)may still be in the running for the digital cross-connect, as well. We believe there was heavy discounting on all optical portions of the GIG BE contract, which would hurt margins. While we think Lucent (LU, $2.17, Overweight rated) was and still is in the running, we believe that unlike Ciena, it did not want to lose money on overly aggressive bids, as the company remains intently focused on profitable revenue growth

>>>you would think they would have mentioned it if it was the case there too
Yes, you would think so. Draw your own conclusions.
BobbyMax
BobbyMax
12/4/2012 | 11:07:33 PM
re: DISA Deal Is Done
The award of the contract to Juniper, Sycamore, Cisco and Ciena is as unfair as it can be. Since the government's award of contract cannot be challenged. it becomes very difficult to be treated fairly. We must remember the US Government does not have a fair contract award system since the last six decades.

It is very interesting to note that the contract was offered with the Assistance of SAIC. It should be SAIC is a company that lives on the bread crumbs thrown by the US Government. I would challenge the award based on the participation of SAIC in chosing contractors.
dave77777
dave77777
12/4/2012 | 11:07:32 PM
re: DISA Deal Is Done
Well, it was amusing to see Corvis up 10% on the DISA news today. LR's take on the news is even more amusing though - Cien may have won the LH contract, but they are probably the biggest loser since they bid LH at a loss expecting to make it up on the cross-connects which SCMR ironically beat them on the same way.

Kind of reminds me of the old salesperson-accountant joke:

Salesperson: "Well, we ended selling below cost. But it's a huge contract, so we'll make it up on volume."

Accountant (slaps forehead): "D'oh!! I knew I shouldn't have let you go to that meeting alone!"
Page 1 / 3   >   >>
Featured Video
Upcoming Live Events
November 5, 2019, London, England
November 7, 2019, London, UK
November 14, 2019, Maritim Hotel, Berlin
December 3-5, 2019, Vienna, Austria
December 3, 2019, New York, New York
March 16-18, 2020, Embassy Suites, Denver, Colorado
May 18-20, 2020, Irving Convention Center, Dallas, TX
All Upcoming Live Events