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Nortel's HDX is Here

Light Reading
OFC/NFOEC News Analysis
Light Reading
3/19/2002

ANAHEIM, Calif. -- OFC 2002 -- Nortel Networks Corp. (NYSE/Toronto: NT) moved to silence its critics today by announcing that it is shipping the Optera Connect HDX optical switch.

In pure capacity terms, the product is impressive. Based on a switching fabric built with eight internally designed ASICs, the switch is designed to start at a 640-Gbit/s capacity and scale to a terabit using the same switching fabric. The line cards will also fit eight 10-Gbit/s ports each, say Nortel officials. Most line cards in optical systems these days only include four 10-Gbit/s optical ports.

In recent months, anticipation had been building about this large, do-it-all optical switch. Some analysts and the financial community have wondered whether Nortel could deliver the product on time -- and with the right customers (see Nortel's HDX: The Future Under Fire ).

On the face of it, the company looks to have gotten at least the first part right. The product is out in the first quarter of 2002, the original delivery date, and includes everything the company said it would.

"We've worked on this. Instead of making a lot of noise, we put our head down and we've delivered it on time," said Brian McFadden, president of Nortel's optical long-haul division, in an interview here with Light Reading.

On the second theme -- the customers -- Nortel may have some more work to do. The first announced customer is Touch America Holdings Inc. (NYSE: TAA), a Montana-based carrier focusing on broadband fiber networks. The emphasis here is on "CLEC," which these days might as well stand for "company losing economic cachet" (see Carrier Crisis: Who's Most at Risk?). The two companies did not release the terms of the deal.

A Touch America spokesman, Cort Freeman, said the company bought the product to consolidate a large collection of Sonet ADMs and digital crossconnects. He said the HDX will minimize the amount of labor inolved in manually managing that equipment, because the HDX allows those connections to be consolidated and provisioned electronically.

McFadden says Touch America is a good pick because it was the first company to buy Nortel's vaunted 10-Gbit/s technology several years ago. He also says they're "doing well."

The fact remains, however, that Touch America's stock was today trading on Wall Street for $3.33 per share and had a market capitalization around $350 million -- not exactly an AT&T Corp. (NYSE: T). Nortel will have to announce larger accounts to gain credibility with the product

So far, Nortel has announced that Genuity Inc. (Nasdaq: GENU) is one of the trial customers, and it says that it has another. This customer may be Bell Canada (NYSE/Toronto: BCE), according to a source inside Nortel's booth here at OFC.

Meanwhile, the optical switching space has cooled, as carriers cut back on large-scale optical projects. That may leave some people wondering if this massively scaleable optical switch is the right product for the wrong time. To Nortel's credit, that hasn't stopped other large players from moving into the market. Cisco Systems Inc. (Nasdaq: CSCO) was preparing an STS1 grooming switch; and, just last month, Lucent Technologies Inc. (NYSE: LU) announced plans for its LambdaUnite, an OEO grooming switch (see Cisco Preps Stealth Switch and Lucent's LambdaUnite Busts Out). That's in addition to optical switching pioneers such as Ciena Corp. (Nasdaq: CIEN), Corvis Corp. (Nasdaq: CORV), and Sycamore Networks Inc. (Nasdaq: SCMR).

Analysts have said the knocks against the HDX are the cost and size. Indeed, the size may be an issue. The product itself takes up two entire standard telecom bays -- although in its introductory configuration the bottom half of the two bays remain empty.

Regardless, the scaleability and flexibility of the product left McFadden feeling bullish: "You can use this to consolidate 16 bays of ADMs. That's the kind of business case that customers are looking for."

— R. Scott Raynovich, US Editor, Light Reading
http://www.lightreading.com For more information on OFC 2002, please visit: www.nottheofc.com

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wdog
wdog
12/4/2012 | 10:46:17 PM
re: Nortel's HDX is Here
Touch America - a CLEC in Montana needs (and can afford) a switch that starts out at 680GBps and scales to 1 Tbps?!?!?

Hold the presses LR, the big news is the market is back! Clearly if Touch America needs this much capacity demand must be exploding!

Question: Is Nortel providing vendor financing for the deal?
stuartb
stuartb
12/4/2012 | 10:46:16 PM
re: Nortel's HDX is Here
Touch America was spun out from Montana Power, who has plenty of money. In one respect they are much like Enron's Broadband Group. Hopefully they fare somewhat better.

-Stu
sonet slinger
sonet slinger
12/4/2012 | 10:46:16 PM
re: Nortel's HDX is Here
Touch America bought US West long distance customer base prior to merger with Qwest http://www.qwest.com/about/med....

Smoke and mirrors none the less.
zweisel
zweisel
12/4/2012 | 10:46:14 PM
re: Nortel's HDX is Here
Perhaps the typo is with Light Reading and not Nortel. then again, 640 or 680, it is irrelevant.
Litewave
Litewave
12/4/2012 | 10:46:14 PM
re: Nortel's HDX is Here
Since when did the HDX suddenly become a 680Gbps initial capacity platform? From the very begining its been 640Gbps, even their Web page says so...

http://www.nortelnetworks.com/...

And now suddenly McFaden's saying the basic box is 680Gbps?? Some additional Gigabits thrown here and there to triump over LU, CIEN's capacities?

I'm surprised no one picked this up and questioned McFaden.

How stupid do they think the "public" is.
optical_man
optical_man
12/4/2012 | 10:46:13 PM
re: Nortel's HDX is Here
Author: stuartb Number: 3
Subject: Re: Touch America?? Date: 3/19/2002 8:05:47 PM
Touch America was spun out from Montana Power, who has plenty of money. In one respect they are much like Enron's Broadband Group. Hopefully they fare somewhat better.
-Stu

Stu,
sort of correct, sort of not. Touch America was Montana Power. Then they decided that power generation was a dead business, so they sold off their power generating facilities (powerplants), and used the proceeds (and their 'rights of way' on the power line towers, a la how qwest did it w/ the railroads) to get in on this cool Telco business. Great idea, but they did it right before the California energy crisis (could have made many billions if they were still running the power plants, sure CA might have sued them for price gouging, but many billions buys you a decade of top flight legal delays and settlement offers, etc) and right before the funding dry up hit the world.

In my view (of course it may be hindsight), that was not a very prudent business move. That's like selling your mineral rights at Spindletop and using the proceeds to build a buggy whip factory for the nex-gen horse carriages. (think about it, there's a vague connection there! :)

So they have some cash now (from the sale of all the powerplants), but their outlook is still to be determined. Having Nortel give them equipment cheaply (Nortel NEEDED the press release on their new box, hence the sweetheart deal) sure doesn't hurt them. However, can they pay the maintenance, upkeep, opex costs down the road? Only time will tell.
macleran_f1
macleran_f1
12/4/2012 | 10:46:12 PM
re: Nortel's HDX is Here
It is a printing error. It should read 640Gbps. I guess the public is stupid!
bunty
bunty
12/4/2012 | 10:46:12 PM
re: Nortel's HDX is Here
Author: optical_man Number: 6
Subject: Re: Touch America?? Date: 3/19/2002 10:37:05 PM

So they have some cash now (from the sale of all the powerplants), but their outlook is still to be determined. Having Nortel give them equipment cheaply (Nortel NEEDED the press release on their new box, hence the sweetheart deal) sure doesn't hurt them. However, can they pay the maintenance, upkeep, opex costs down the road? Only time will tell.

------------

Touchamerica is a relatively older CLEC. In fact they were one of the first to go 10Gbps (I'm not sure if they were the first as the press release says). And they've been cleverer than most of the carriers when it came to investing optical.

Sure nortel did need the press release. But touch needs the HDX as well. Touch has to let go of all the CO space they got when qwest merged with uswest, and they need to consolidate a fair bit. Thus the need for them to go HDX.
erwin
erwin
12/4/2012 | 10:46:10 PM
re: Nortel's HDX is Here
To be exact, the OPTera Connect HDX switch initially starts with a switch capacity of 640Gb/s (instead of 680Gb/s as reported by LightReading) and scales to a total switch capacity of 3.84 Terabits (as opposed to 1 Terabit as reported by LightReading).

Maybe LightReading should ensure they have a minimum numner of facts right, or proof-reads their articles. Maybe their rush to discredit Nortel's progress in delivering this product on-time and on-feature was the first priority.

erwin
kephill
kephill
12/4/2012 | 10:46:07 PM
re: Nortel's HDX is Here
There were no problems in the trials. It was all negative spin by the media including LR.
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