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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 3 / 3
technonerd 12/4/2012 | 11:07:26 PM
re: DISA Deal Is Done you know, shut the hell up
Wow, I bet your kids love you!
dave77777 12/4/2012 | 11:07:26 PM
re: DISA Deal Is Done LOL lilgatsby, your comments remind me why our kids need school vouchers: our public schools are producing too many angry, "dumbed-down" people such as yourself.

Glass houses? Stones? LOL My "unsubstantiated excuses" were published in several articles and made by several analysts. Where's the support for your assertions? Sorry, a note from your mom doesn't cut it in the real world.

Happy holidays, buddy.
<<   <   Page 3 / 3
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