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Optical/IP

DISA Deal Is Done

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

<<   <   Page 2 / 3   >   >>
ATMRules 12/4/2012 | 11:07:32 PM
re: DISA Deal Is Done Like you know what was going on 6 decades ago BobbyMax???? And yes I do work for one of those 4 companies....your handle should be more like BobbyLESS!!!!!!!!!!!!!!

Happy New Year!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Iipoed 12/4/2012 | 11:07:31 PM
re: DISA Deal Is Done BM-did you read the RFP, did you read the responses, do you have any idea of the specifications and vendor requirements? Do you have any idea at all of what you are talking about?

who should have been awarded the contracts?

I for one want the best companies with the best management available providing technology and support services to my govt.

In these uncertain times why would anybody in their sane mind want to take a chance with our national security.

You once again prove you are an Idiot.
technonerd 12/4/2012 | 11:07:31 PM
re: DISA Deal Is Done In these uncertain times why would anybody in their sane mind want to take a chance with our national security.

Corruption alert!
lilgatsby 12/4/2012 | 11:07:30 PM
re: DISA Deal Is Done dave77777, your comments remind me of a saying, "People in glass houses shouldn't throw stones".

Your unsubstantiated excuses as to how corv lost this bid, that was supposed to be a perfect fit for their super OOO bucket of bolts, are a weak and pathetic deflection effort.

Did the corv post-award dialogue go something like this:

Marketing-person (Sales are long extinct): "Well we lost another one, but it was unfair because other vendors had reference accounts, hardware that worked AND better pricing."

Accountant: "That's OK, we had no chance of supplying functional hardware or supporting a network of this size...besides, now we can finally write off the hardware division and focus on being a service provider. How much do you think we can get for this Dorsal mouse-pad..."

Happy holidays, chap.
lg
semimania 12/4/2012 | 11:07:29 PM
re: DISA Deal Is Done Why did they do 5 times thier normal volume today and Cien only did 2 and half times thier normal volume , Why on so called bad news did a ton of investors pile into Corv ?? Markets are always ahead of peanut gallery journalists
semimania 12/4/2012 | 11:07:28 PM
re: DISA Deal Is Done sorry should read why gave them a split decision and not and all out loss
semimania 12/4/2012 | 11:07:28 PM
re: DISA Deal Is Done Dave you said < 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 >

I could not agree more why LR did not put them in the loser list is a joke as about as objective as NPR for the left and FOX for the right , everybody knows they are skewed except them

WAKE UP LR
fw23 12/4/2012 | 11:07:27 PM
re: DISA Deal Is Done >you know, shut the hell up.

Still cashing those Juniper paychecks I see.

Tell Scott its not working, its not going to
work and that he should worry more about his
market perception (or lack of it) than sending
bashers out to attack good hardworking people
with opinions.


fw23 12/4/2012 | 11:07:27 PM
re: DISA Deal Is Done >Why did they do 5 times thier normal volume >today and Cien only did 2 and half times thier >normal volume , Why on so called bad news did a >ton of investors pile into Corv ?? Markets are >always ahead of peanut gallery journalists.

Because the *INVESTORS* know something the
guys in the peanut gallery dont. Like maybe
there is more than meets the eye to this story.
And whats going on outside the view of the
peanut gallery means more than a huge money-losing
givaway contract from the ambulance chasers
running Ciena.

I'll help those interested in seeing the
logic:

LIGHT->COST->CORVIS->DORSAL->BROADWING=>(?????)

The era of the legacy network is over. SBC,
Verizon and the rest better figure that out
soon or they are out of business.

change_is_good 12/4/2012 | 11:07:27 PM
re: DISA Deal Is Done >> The award of the contract to Juniper, Sycamore, Cisco and Ciena is as unfair as it can be.


you know, shut the hell up.
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