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Routing

Avici Out of Turk Telecom

Core router firm Avici Systems Inc. (Nasdaq: AVCI; Frankfurt: BVC7) has been kicked out of its engagement at Türk Telekomunikasyon A.S. , the vendor announced this morning.

Avici had been supplying its TSR routers to the carrier through a deal brokered by Alcatel (NYSE: ALA; Paris: CGEP:PA), the lead integrator for the carrier's IP/MPLS network rollout. (See Turk Selects Avici .)

Now, though, Avici says the supply agreement with Alcatel has been "terminated." The two companies will "unwind the financial arrangements and decommission the routing equipment," Avici said in a prepared statement.

The news sent the router vendor's stock down $0.39 (4.52%) to $8.23 in early morning trading on Friday.

It's not immediately known why Avici has been thrown out of the carrier's network. When the engagement was initially announced a year ago, the carrier's director of data networks, Yucel Bagriacik, was quoted as saying: "The Avici solution has demonstrated its ability to meet the demands of our next-generation network."

Avici had not yet reported any revenues from the Turk Telecom deal, but noted during its first quarter conference call in April that revenues were expected during 2006. (See Avici Soars on Q1 Numbers.)

Prudential Equity Group LLC analyst Inder Singh says he wasn't expecting much in the way of revenues from the Turk Telecom deal in 2007, but notes that "it's somewhat negative that Avici is being decommissioned. It doesn't really give them the Good Housekeeping Seal of Approval."

While Avici has been outperforming expectations this year, it can't afford to lose any customers. It is heavily reliant on business from AT&T Inc. (NYSE: T), and needs to expand its customer base, not see it retract. (See Avici Rocks 42% on Shock Profit.)

Executives from Avici and Turk Telecom couldn't be reached for comment. Alcatel could not immediately respond to questions about a replacement for Avici.

The obvious replacement would be either Cisco Systems Inc. (Nasdaq: CSCO) or Juniper Networks Inc. (NYSE: JNPR). Juniper is a close partner of Alcatel's bride-to-be, Lucent Technologies Inc. (NYSE: LU). There's also the possibility that Alcatel will try and persuade Turk Telecom that it has the router power to replace Avici. (See Alcatel Sticks to Core Plans and Rumor: Alcatel Craves the Core.)

Turk Telecom is undergoing a significant overhaul of its network and back office systems, and is planning to invest about $3.5 billion during the next six to seven years. — Ray Le Maistre, International News Editor, Light Reading

reoptic 12/5/2012 | 3:38:32 AM
re: Avici Out of Turk Telecom Chipgeek,
With the enormous investment carriers have in legacy core routing infrastructure such as chassis and line cards, the investment to replace an entire backbone with a different vendor is prohibabtive. Cap and grow is not that economical either as there is cost of dual networks, retraining etc.

How many carriers with large existing backbones have replaced their core vendor in last 3 years? (And that doesn't mean ran a trial with a node or two) Can you name any?
twill009 12/5/2012 | 3:38:32 AM
re: Avici Out of Turk Telecom Honestly, how can AT&T continue to use a vendor whose routers were designed last decade and has no other customers? I have to believe that Cisco's CRS-1 is going to supplant Avici at AT&T, but no announcement has been made. Am i missing something? Any insights from the LightReading readers?
twill009 12/5/2012 | 3:38:31 AM
re: Avici Out of Turk Telecom As best as i can tell, core routing market share has shifted back and forth between Juniper and Cisco for many years as carriers have steered business one way or another. Carriers can co-mingle routers -- especially after mergers. Verizon is a case in point -- from what i understand, they use JNPR and CSCO routers in the core.

You are implying that once a carrier chooses a core router vendor, they never change. Yet the evidence is the opposite -- that is one reason Cisco has momentum right now and Juniper has struggled. I doubt AT&T will forklift replace Avici, but a cap and grow strategy would only be prudent considering that Avici is shutting down much of its development team.

Huawei, Nortel and now Alcatel have cancelled deals with Avici. Seems like the writing is on the wall, but maybe you are right. Just seems very dangerous for a big carrier like AT&T to depend upon a wisp of a company like Avici. Do you work for them?
materialgirl 12/5/2012 | 3:38:30 AM
re: Avici Out of Turk Telecom If ALA has stated that their true strategy going forward is to use their own routers when-ever possible, why would they let CSCO into an account? If they have account control at a small carrier like this one, it is a perfect opportunity to stuff their own gear.
tmc1 12/5/2012 | 3:38:29 AM
re: Avici Out of Turk Telecom Avici has been "dead router walking" at AT&T (classic) in NJ for several years. It has always been a question of who replaces them and when.

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