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Optical/IP

Lehman Spots Gov't RFP Surprises

Lehman Brothers analysts Steven Levy and Tim Luke report they've uncovered new information about the Global Information Grid Bandwidth Expansion (GIG BE) project, a global telecom network planned by the U.S. Department of Defense. At least one long-haul startup, Innovance Networks, is now said to have a shot at winning some of the available business (see What's Cookin' at Core Startups?).

"We believe privately-held Innovance Networks responded to the long-haul optical transmission subcontract. It appears Innovance used a partnership approach, and a service provider bid the Innovance equipment in its response," write Levy and Luke.

Innovance CEO Peter Allen confirms that Innovance is in field deployments with the carrier. Beyond this, he won't comment. "Obviously, it's a very exciting time," he says.

Background: The GIG BE request for proposal (RFP) was released last month (see DISA Deal D-Day Approaches and Corvis Spikes on DISA Talk ). Subcontracts are being tendered for optical transport, optical crossconnects, MSPPs (multiservice provisioning platforms), and IP routers. The project's expected to draw $800 million to $900 million over two years.

Though the Lehman note says one service provider has responded to the RFP, narrowing the range of possible Innovance partners is tough. "AT&T, MCI, Sprint, and Qwest have been Innovance's key targets, mainly because of their size," says Brian Van Steen, principal analyst at PointEast Research LLC. But he won't speculate further.

Levy and Luke's predictions about GIG BE take into account vendors' ability to meet the newly revealed fine points of the proposal. These include the need to support both SDH and Sonet in the MSPP contract, and both edge and core for the IP router portion. It also appears that ATM won't be used for switching. Here's the analysts' latest predictions:

Table 1: Lehman's Updated Snapshot of GIG BE
GIG BE RFP subcontract Est. size over 2 years Potential bidders Probable winner(s)
Optical transport $200M to $300M Alcatel, Ciena, Cisco, Corvis, Fujitsu, Innovance, Lucent, Nortel Ciena, Corvis, Nortel
Optical crossconnect $100M to $150M Alcatel, Ciena, Cisco, Corvis, Lucent, Nortel, Sycamore Ciena, Lucent
MSPP $150M to $200M Alcatel, Cisco, Fujitsu, Lucent, Nortel Cisco, Lucent, Nortel
IP router $150M to $200M Cisco, Fujitsu, Juniper, Tellabs Cisco, Juniper
Source: Steven Levy and Tim Luke, Lehman Brothers Equity Research


One determinant of the RFP outcome, the analysts say, looks to be vendors' ability to get an "in" with the government or Science Applications International Corp. (SAIC), which is overseeing the selection process for DISA.

"Relationships could play a much more influential role in vendor selection than originally thought -- we are referring to relationships between equipment vendors and SAIC and the U.S. government, as well as partnerships among the vendors," the analysts write.

The situation apparently has vendors tugging the strings of government relationships with renewed fervor. Lucent Technologies Inc. (NYSE: LU), for instance, is "using its solid relationship with its unionized workforce to help influence the government's decision," the note says. The analysts say they've confirmed this in talks with the Communications Workers of America.

Contracts for the RFP probably won't be announced until late September 2003, the analysts say, following a shortlist selection by SAIC and an interoperability test at the AT&T labs in New Jersey.

— Mary Jander, Senior Editor, Light Reading

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WillLiteFiber4Food 12/4/2012 | 11:48:24 PM
re: Lehman Spots Gov't RFP Surprises What are the encryption requirements for GIG-BE?
Specifically how will they do the link level encryption? If I remember correctly they currently use devices which can encrypt the payload of the ATM cells at OC48 speeds. They place these on the core facing links.
Light-bulb 12/4/2012 | 11:48:23 PM
re: Lehman Spots Gov't RFP Surprises Will,

I believe KG-75a would be the device. Also I believe TacLANE KG-175 will be used for aggregation links and/or Ethernet connectivity. KG-75A for OC-48 and OC-192c, and KG-175 for DS3 and 10/100 ethernet.

Cheers,
lame_duck 12/4/2012 | 11:48:23 PM
re: Lehman Spots Gov't RFP Surprises Mary et al.

It would be totally within LR's capabilities to do their own analysis on the GIG-BE RFP and come up with their own short list of potential winners. The RFP is a public document so this should be straightforward. Or perhaps at least some comments on what equipment Levy et al are thinking are going to be offered by their probable winners. For example CoreDirector by Ciena makes sense for ODXC, but what do they have that comes close to the OTS RFP specs? And why would one expect Nortel (read: foreign company not supportive of Iraq wars) to win?

Whattaya say?
zeno 12/4/2012 | 11:48:19 PM
re: Lehman Spots Gov't RFP Surprises Telecom-Gear Firms Bid on Government Pacts Despite Delays
Thursday July 3, 12:35 pm ET
By Tom Becker


NEW YORK -- A possible delay in the awarding of four government
contracts valued at between $800 million and $900 million hasn't kept
telecommunications- equipment makers from bidding on the project.
ADVERTISEMENT


The Department of Defense is soliciting bids to build its own next-
generation optical network using Internet protocol routers. Contract
announcements could come in late September, suggesting equipment-
vendor revenue from the deals could slip into early 2004, according
to a research note published Thursday by Lehman Brothers Inc.
(NYSE:LEH - News) analyst Steven D. Levy. The contracts were
initially set to be awarded in early September, bringing revenue to
the vendors before the end of the year. The awarding of the contracts
has been pushed back as the government takes more time to review
proposals.

More than a dozen companies have contacted the Defense Department and
expressed interest in one or more of the four subcontracts, including
Ciena Corp. (NasdaqNM:CIEN - News) , Cisco Systems Inc.
(NasdaqNM:CSCO - News) , and Nortel Networks Corp. , Mr. Levy said.
The equipment manufacturers are hoping to win a portion of the four
subcontracts, which Mr. Levy said are valued at $800 million to $900
million over two years.

The subcontracts include an optical transport contract, an opt-cross
connect contract, an IP router contract and a long-haul contract, the
analyst said. The optical transport contract is estimated to be the
largest, with a value of between $200 million and $300 million, Mr.
Levy said. Potential bidders include Alcatel SA , Ciena, Corvis Corp.
(NasdaqSC:CORV - News) , Cisco, Fujitsu Ltd., Innovance Networks
Inc., Lucent Technologies Inc. (NYSE:LU - News) , and Nortel. Mr.
Levy said the most likely winners are Ciena, Corvis, and Nortel.

The opt-cross connect contract is valued between $100 million and
$150 million. Potential bidders include Alcatel, Ciena, Corvis,
Cisco, Lucent, Nortel, and Sycamore Networks Inc. (NasdaqNM:SCMR -
News) . Ciena and Lucent are the probable winners, Mr. Levy said.

The IP router contract is valued between $150 million and $200
million. Cisco, Fujitsu, Juniper Networks Inc. (NasdaqNM:JNPR -
News) , and Tellabs Inc. (NasdaqNM:TLAB - News) are the potential
bidders, according to Mr. Levy. Cisco and Juniper have the edge, Mr.
Levy said.

"Given its strong competitive positioning in IP routing, we consider
Juniper's t-series router can be a strong contestant for the routing
subcontract," Mr. Levy said. "We note that within the Cisco-Juniper
routing duopoly, the t-640 router may actually be the only
commercially available router that meets the stringent high capacity
requirements for routers listed (in the contract)."

Mr. Levy added that Cisco is in a strong position to win at least
part of the IP routing subcontract given the "strength and breadth of
its router product line and IP service switch line."

The fourth subcontract is the long-haul contract - valued between
$150 million and $200 million. Lucent, Cisco, Nortel, Fujitsu, and
Alcatel are the probable bidders. Mr. Levy said Lucent, Cisco, and
Nortel have the best chance of winning the contract.

Mr. Levy doesn't own shares of any of the telecom-equipment companies
vying for the contracts. Lehman Brothers or an affiliate may have
performed investment-banking services for the companies
mbledug 12/4/2012 | 11:48:17 PM
re: Lehman Spots Gov't RFP Surprises The question is: Who is partnering with whom???
BobbyMax 12/4/2012 | 11:48:17 PM
re: Lehman Spots Gov't RFP Surprises The following facts have not been disclosed by the RFP.
1. What is the purpose of the network?
2. Which countries will be connected via the proposed network?
3. What is the benefit of the proposed network? Who is the major beneficiary of this network?
4. Will the US manage the entire network or the part of the network that lies within the US territory?
5. Will this be a network for spying and disruption of communication in certain countries?
6. Will the netbork be open to international inspectors to make sure that the US is not using the network to spy on other countries or transmting pornographic material to the US based troops in other countries. The idea is similar to providing prostitution facilities in Taiwan, Singapore, Phillipine an South area to quench the thrust passion and lust for the US soldiers posted in Vietnam?

7. Will the US attach remote listening devices to the network for the purposes of spying on foreign citizens?

How can one get a copy of the RFP?
dodo 12/4/2012 | 11:48:16 PM
re: Lehman Spots Gov't RFP Surprises "And why would one expect Nortel (read: foreign company not supportive of Iraq wars) to win?"

Are you aware that MOUs are signed between USA and foreign countries like Canada and France for procurement of equipment by the US govt?

Have you heard about the shKVAL torpedo/missile? Guess who helped the DoD get his hands on one last year while ex-naval intelligence officer Pope was in a Russian prison ? The dear old National Defence of Canada.

We should not mix politics and politicians (like Rumsfeld who was appointed by GW) with real and intelligent people working for the security ( even secured communication) of the nation.
sunra 12/4/2012 | 11:47:59 PM
re: Lehman Spots Gov't RFP Surprises Dear Boob,

Try the DISA website, the RFP is available there (click on the gold star). This should reveal all, well almost all, the location of the 90 sites to be networked is classified.

S.
pearlh 12/4/2012 | 11:47:59 PM
re: Lehman Spots Gov't RFP Surprises Why is Siemens not on that list?
lame_duck 12/4/2012 | 11:47:58 PM
re: Lehman Spots Gov't RFP Surprises dodo wrote:

"And why would one expect Nortel (read: foreign company not supportive of Iraq wars) to win?"

Are you aware that MOUs are signed between USA and foreign countries like Canada and France for procurement of equipment by the US govt?

Have you heard about the shKVAL torpedo/missile? Guess who helped the DoD get his hands on one last year while ex-naval intelligence officer Pope was in a Russian prison ? The dear old National Defence of Canada.

We should not mix politics and politicians (like Rumsfeld who was appointed by GW) with real and intelligent people working for the security ( even secured communication) of the nation.

_______________________________

Well, you've argued (somewhat unconvincingly) that NT shouldn't be arbitrarily dismissed from the DISA build. How about some thoughts on why NT ought to win? What equipment set has NT likely proposed for the OTS package and given the RFP specifications why should NT win over other bidders?
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