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RBOC Whispers for Catena

Is Catena Networks Inc. is hiding its light under a bushel? The startup maker of new-fangled digital loop carrier (DLC) access gear is said to have business coming from three different regional Bells.

Catena has acknowledged it is supplying gear to the major RBOCs, but it won't speak of particular carriers.

"Catena has received orders from the three largest RBOCs and major independent operating companies (IOCs)... As of mid-June, major carriers had deployed more than 1,500 of Catena's integrated broadband access systems -- including the CNX-5 Broadband DSL System and the CN1000 Broadband Loop Carrier," says a Catena spokesperson, via email.

A report distributed earlier this month by Deutsche Bank AG says Catena is supplying gear to BellSouth Corp. (NYSE: BLS), Verizon Communications Inc. (NYSE: VZ), and SBC Communications Inc. (NYSE: SBC). These also happen to be the three largest RBOCs by revenue, so it meshes with Catena's story. Deutsche Bank analysts George Notter and Cobb Sadler authored the note.

The BellSouth relationship was first reported in Boardwatch some time ago (see Catena Cozies Up to RBOCs), but the other two customers appear to be recent developments. That said, it's no surprise this is just coming out -- RBOCs are very selective when they talk about their equipment suppliers and usually don't announce anything until after the gear has been installed and is running.

The carriers are likely upgrading their old POTS line cards in traditional Lucent Technologies Inc. (NYSE: LU) SLC (subscriber loop carrier) systems with combined ADSL and POTS interfaces that Catena sells, the Deutsche Bank report says. "We believe that Catena is also a preferred method for RBOC upgrades of DLC systems for DSL support."

Catena's line-card upgrade business is nothing to sneeze at. The company says it sees that there are about 20 million access lines served by DLCs that could be upgraded with its line-card solution.

But two important barriers remain before the startup can really claim it has conquered the RBOCs. First, not all of the 20 million DLC lines will be upgraded. Those that can could also be upgraded by a Lucent SLC replacement system from Adtran Inc. (Nasdaq: ADTN) or a mini-DSLAM add-on, such as those sold by Allied Telesyn Inc.

The second big issue for Catena is that a line-card upgrade doesn't guarantee any systems sales. Catena sells both a line-card upgrade and an entire system upgrade.

An analyst who wishes to remain anonymous puts it more bluntly: "I would imagine that most new chassis sales are going to go to Alcatel SA or Advanced Fibre Communications Inc., not Catena."

— Phil Harvey, Senior Editor, Light Reading

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tspoon 12/4/2012 | 11:50:11 PM
re: RBOC Whispers for Catena Occam Networks also plays in the same space. They have announced a number of small wins, but have also talked about 20, or so trials including ILECs. A Wall St analyst was talking about a win for Occam in California. This was heard at Supercom (Nasdaq, OCCM) OCCM could be the less expensive acquisition for an ALCATEL, ADC, etc. lets face it market share is king and Catena does not have a big brother. Both Catena and Occam will win. cool t4chnology. PS
I am an SBC user, and there is no sign of any swap outs at all at this point. I work with their priority services group as a consultant.
firstmile 12/4/2012 | 11:50:11 PM
re: RBOC Whispers for Catena Outside Guy,
I'd love to see success for start-ups, but I also believe like it when folks stay a little closer to reality.
No one (including the CEO) mentioned how Catena will displace the NGDLC contracts that Alacatel and AFCI currently own.
I love the SLC5 card idea...but that does not deliver on the "Billion Dollar Plan"
...first
opticalweenie 12/4/2012 | 11:50:10 PM
re: RBOC Whispers for Catena OSPguy
Didn't you learn anything from the recent bubble burst?
Catena claims that they will reach $1 billion
in sales in a mere 5 years from now. Of course
extrapolating this from their current maybe $15 million in sales now? That means that they have
to, on average, increase their sales by 230% each
year!
It would be better to bet on bunnies!
Weenie
OSPGuy 12/4/2012 | 11:50:05 PM
re: RBOC Whispers for Catena Weenie,

Yup, catena faces long odds. But signing up three RBOCs (are there more than three?) in an undeniably hostile telecom environment is a feat that no other start-up can match.

So what's to become of them?

IPO? not likely. Even at 15 million in revenue (let's take your word for it), they still have a long way to go.

Stay private? Maybe, but no-one's buying any new SLC5s, so the more catena sells their little SLC5 upgrade, the smaller their market becomes. What do they do next?

Buyout? Probably the best they can hope for. But who's buying in this environment? Cienna acquired Wavesmith for peanuts. Is there another bag of peanuts out there for catena?
opticalweenie 12/4/2012 | 11:50:04 PM
re: RBOC Whispers for Catena OSPGuy
It depends .......
....on whether they want canadian $ peanuts

....or us $ peanuts!

Weenie
rogerramjet 12/4/2012 | 11:49:55 PM
re: RBOC Whispers for Catena Interesting discussion - I was at SuperComm and spent a great deal of time in the Catena booth - Not only did they have the CNX-5 card solution ( and for those idiots who continue to talk about just $$$s - A system is either 1 or 2 common cards and 192 CU cards - which add to lots of dollars - PLUS - A REBOC will also purchase Support contracts, Training and also Professional services - which as we know except for a few morons are high margin items) This will be there cash cow for at least 3-4 years but what I liked what I saw with their ONC and FTTH product s that actually worked (not lie some of the other booths I had a chance to visit !!) Oh by the way TSPOON - a SBC User - I Live in Hartford ( just in case you do not know- thats SNET .. and since you are a dumb over paid consultant - it is also SBC and guess what - we now have Catena in our area and I have placed an order to get off that damn cable modem) The CNX-5 product will be the cash cow for the next 3-4 years but their ONC FTTH and CN1000 products are sound and if the 3 big REBOCs have the balls to buys the CNX 5 product from them and if its in volume - I see them looking at there other products very closely over the next few years ... I'd say with this present market and the lack of real products from other vendors and the real numbers they have beyound Trails - Catena 2 thumbs up and good luck

Proton pill time

RogerRamjet
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