Lucent/Verizon DWDM Deal: When?
Lucent Technologies Inc. (NYSE: LU) has won a three-year deal to supply metro DWDM gear to Verizon Communications Inc. (NYSE: VZ). (See Lucent Provides Ring DWDM to Verizon.)
The agreement, which has been brewing for a long time (see Tellabs Losing Its Edge?) calls for Lucent to equip Verizon central offices nationwide with its Metropolis EON platform, a 32-channel DWDM system designed to work with metro rings at data rates to 10 Gibt/s. Lucent says the gear will eliminate bottlenecks in Verizon's regional networks and that trials will begin in Philadelphia "later this spring."
Lucent won't divulge the value of the deal, except to say it's the largest win yet for the vendor's Metropolis EON platform. That doesn't say much: The only other publicly announced contract for the gear is a $4.8 million deal with Slovakia Telecom (see Lucent Weighs on the World). But sources says it's common knowledge the Verizon DWDM arrangement could mean hundreds of millions of dollars to Lucent. The question is: When will it happen?
Analysts say the introduction of Lucent gear into Verizon's network may be stymied by the ongoing telecom spending slowdown, which continues to include Verizon. Indeed, during its quarterly earnings report this morning, the carrier announced it will cut capex by at least $1 billion -- to a range of $14 billion to $15 billion for 2002 (see Verizon Posts Q1 Earnings).
"I see no major spending for any of the carriers this year," says Steve Kamman of CIBC World Markets. He and his colleagues have taken a hard line against optimism about trial wins. "It will come to pass, eventually. But there will be no rush to install anything that isn't absolutely necessary."
Others say that if Lucent winds up being disappointed in its Verizon win this year, it won't be the first time. "Lucent's won other contracts at Verizon that haven't panned out in the near term due to cuts," says another Wall Street analyst, who asked not to be named. "Verizon will ultimately spend, but it may take baby steps to get there."
Even Verizon concedes that in the best of times there may be a long gap before a chosen product makes it to the RBOC's network. "How long between an official selection announcement and deployment is anybody's guess," a spokesperson said last week. "There's a fair amount of lead time. With a network like ours, everything is extensively tested and retested. We don't take any chances."
— Mary Jander, Senior Editor, Light Reading