Optical/IP Networks

Siemens Jumps for Juniper

ATHENS -- Siemens Information and Communications Networks Inc. is feeling pretty good about things at the moment, judging by presentations that its top brass gave today to more than 70 journalists at a "Global Opinion Leader Conference" here at the venue of the 2004 Olympic Games.

The reasons for its upbeat mood include news that Siemens is now selling lots of routers via its reseller deal with Juniper Networks Inc. (Nasdaq: JNPR). Siemens is now responsible for 20 percent of sales, up from 12 percent, according to Anton H. Schaaf, a member of Siemens ICN's Group Board.

Siemens and Juniper have been working together on a program called Resip, for "resilience in IP" which aims to help carriers ensure that their IP infrastructures can handle the demanding requirements of VOIP applications incorporating voice and video. This has helped Siemens and Juniper win a big contract for broadband infrastructure with British Telecommunications plc (BT) (NYSE: BTY; London: BTA), according to Thomas Ganswindt, group president of Siemens ICN.

A key part of this contract is the broadband remote access server (B-RAS) originally developed by Unisphere, which was sold to Juniper as part of the deal that saw Siemens acquire a 10 percent stake in Juniper (see Juniper Nabs Unisphere for $740M).

So, does Siemens now regret "getting rid" of Unisphere, asked a cheeky British journalist. "No," said Ganswindt. Unisphere needed the sales volume that Juniper could deliver. Moreover, it's been a good investment. Siemens's holding in Juniper has tripled in value since the transaction, added Michael Kutschenreuter, Siemens ICN CFO.

Siemens continues to say that it's unphased by Juniper's other resale agreements, notably with Lucent Technologies Inc. (NYSE: LU) and LM Ericsson (Nasdaq: ERICY).

Ganswindt also took time out today to brag a little about Siemens's success in the U.S. in the past year. This includes:

  • Its contract with SBC Communications Inc. (NYSE: SBC), under which the RBOC will roll out a raft of VOIP applications targeting enterprises. This will enhance existing services it offers via the VOIP network of Level 3 Communications Inc. (Nasdaq: LVLT) and will mean that SBC now installs its own VOIP infrastructure, from Siemens. SBC and Siemens aren't disclosing the value of the five-year contract, but "it's the largest infrastructure buildout we've done to date," according to Susan B. Schramm, a Siemens senior vice president. It was announced earlier this week (see SBC Picks Siemens for VOIP Applications).

  • Its contract with AT&T Corp. (NYSE: T) for long-haul equipment. Ganswindt says he ignored advice to throw in the towel on long haul on the basis that carriers had too much capacity in their networks. He talked to customers and discovered that although this was true, carriers desperately wanted to cut the cost of operating their long-haul backbones. Siemens developed a way of delivering this, by focusing on automation. He says the contract with AT&T is "almost exclusive" but admits that it doesn't include optical switches... yet (wink). (See Siemens Has Hopes at AT&T.)

  • Its contract to provide VOIP equipment to Cablevision Systems Corp. (NYSE: CVC) so the cable operator can offer guaranteed high-quality telephony services. Apparently, the service is selling like hot cakes.
Siemens says that it's survived the recession better than most, noting that in the carrier market, its sales volumes decreased 56 percent between 2001 and 2003, compared to an industry average of 61 percent. It claims to be No.3 in this market in terms of worldwide sales in the fourth quarter of 2003:

Table 1: Competitive Ranking in Carrier Market
Company Q4 2003 sales in billions of euros
Alcatel 1.87
Cisco 1.1
Siemens ICN 0.83
Lucent 0.81
Source: Siemens ICN

Siemens says it's a similar picture in the enterprise market, where its sales decreased 21 percent between 2001 and 2003, compared to an industry average of 23 percent. It claims to be No.2 in this market:

Table 2: Competitive Ranking in Enterprise Market
Company Q4 2003 sales in billions of euros
Cisco 3.3
Siemens ICN 0.87
Avaya 0.79
Alcatel 0.39
Source: Siemens ICN

Siemens ICN has returned to profit in the past two quarters, according to financial results announced in January and reviewed by Kutschenreuter in the conference today. It made a group profit of €51 million in the first quarter of its 2004 financial year, and €56 million in the previous quarter:

Table 3: Siemens ICN Carrier Business
FY2003 Q1/2004 Change Year on Year
New Orders 3608 939 -10%
Sales 3455 834 -9%
Profit -439 42 199*
Figures in millions of euros. *Change in absolute figures.

Table 4: Siemens ICN Enterprise Business
FY2003 Q1/2004 Change Year on Year
New Orders 3475 913 3%
Sales 3684 870 -2%
Profit 220 47 3*
Figures in millions of euros. *Change in absolute figures.

The key figures are the book-to-bill ratios these results indicate -- 1.13 in the carrier market and 1.05 in the enterprise market, according to Kutschenreuter. They indicate a growing order backlog and a more promising future for Siemens ICN.

— Peter Heywood, Founding Editor, Light Reading

COMMENTS Add Comment
warum? 12/5/2012 | 2:27:17 AM
re: Siemens Jumps for Juniper aint it grand. Germans don't do comedy and by the looks of it they don't do honesty either.For those of you who want a real look at a Siemens mentality I have take the liberty of rewriteing Hr.Ganswindts Commentsto the way it should read(second bullet)

"Ganswindt says he tried to shut the US DWDM market down a number of times but those damn American just kept at it. He talked to no one and had no idea what was going on or how close they were to a deal. A group of 7 Americans developed a way of delivering what AT&T needed, by focusing on doing things the American way, telling Munich where to put their "processes" and demonstrating how to price S(urpass)HiT. He says the contract with AT&T is "almost exclusive" but admits that it doesn't include optical switches... yet (wink).Ganswindt went on to add that the American were ecstatic with the win, but just to make sure they don't make too much money he promoted a German to run the US DWDM operation to weed out any excitement or enthusiasm and piss off the customer"
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