Ciena Corp. (Nasdaq: CIEN) and Huawei Technologies Co. Ltd. could be teaming up in a joint reseller agreement that would allow Huawei to distribute some of its optical networking products in the United States, while giving Ciena a deep Chinese sales channel for its CoreDirector.
Speculation surrounding the potential partnership surfaced today in a research note written by Nikos Theodosopoulos of UBS Investment Research.
“We believe that Huawei is seeking a U.S. partnership,” writes Theodosopoulos. “And we view Ciena as the most likely candidate.”
Yesterday, Light Reading reported that Fei Min, Huawei's executive vice president, had indicated to Asian journalists that the company was looking for a U.S. partnership (see Huawei on the Hunt).
Ciena, which ended its quarter today, says it has no comment on the subject.
“We haven’t made any public comments regarding any Asian manufacturers,” says Denny Bilter, spokesman for the company. “And we’re not ready to comment on any relationships at this time.”
While the benefits to Huawei are obvious, Theodosopoulos says that Ciena could also benefit from the arrangement, both overseas and in the U.S. Specifically, he says Ciena would be able to sell Huawei’s multiprotocol service provisioning platform (MSPP). Ciena's K2 product has not been a success, and Ciena could benefit from the addition of Huawei’s product, he says in the note (see Ciena's K2: What Problems?).
Ciena has already shown signs that it is looking for additional metro optical solutions. The company recently invested in a resilient packet ring startup, Luminous Networks Inc. (see Ciena Links Up With Luminous).
An agreement between the two companies would also likely include Huawei reselling Ciena’s gear in China. Huawei, which did $2.7 billion worth of business in 2002, generates most of its revenues from Chinese service providers. Since Huawei doesn’t have an STS-1 optical bandwidth management product, it would likely resell Ciena’s CoreDirector switch. Theodosopoulos says there is little overlap between the companies' switching platforms.
Ciena has already tried to get into the Chinese market. In June 2001, the company signed an agreement with Beijing IDN, a joint venture between China Electronic Corp. (CEC) and IDN Telecom Inc., to resell the CoreDirector. Theodosopoulos says that Ciena had one strong quarter into China after this distribution agreement was established in April 2002. But after this quarter, sales to China fell off and never recovered.
He writes, “We could certainly see the logic behind Ciena partnering with Huawei if it were to get a better channel into the China market for its CoreDirector product.”
re: UBS Sees Ciena & Huawei as Partners Some good points in the article. Would Ciena have more to lose in US market by letting in competition against its own lines? Or would it offset the benefit by being able to sell more solutions?
How much can Huawei help to sell Ciena's products internationally? Huawei will eventually attempt to compete with CoreDirector as well.
re: UBS Sees Ciena & Huawei as Partners Any company that has 1B$ in the bank will attract a lot of interest these days. Sometimes, just like flies. Ciena's history reveals that the only thing that every paid back was Lightera acqusition. The other acquisitions have not panned out both in terms of marketplace and in terms of inetgrating the people. The new theme of using a reseller or partnership scheme will help them evaluate who to wed after a few flings. However, it is quesionable if Ciena understands access and metro markets to be able to make any significant impact with all these deals.
While Tellabs, no doubt not so glamorous a company, has made some careful choice in where to invest when both money is precious and the wares in the marketplace plenty, very nichy and often ill conceived ideas that will not stand the test of time.
Huawei, meanwhile, is a predator on the prowl. Hungry and calculative.
re: UBS Sees Ciena & Huawei as Partners they could be the WAL-MART for ROUTERS/SWITCHES Hire cheap foreign workers for noc,field engineers and sales people.
re: UBS Sees Ciena & Huawei as Partners I find their site just as tedious as the Cisco web site...maybe Cisco should file suit over this as well, eh?
Word to the unwise, edge routers and LAN switches are commodity just like hubs, NICs and transceivers. Cisco is concerned with maintaining its margin not technology, and they should be...this is exactly the company that can erode their market.
Let's not fool ourselves, Cisco isn't too concerned with Optical. Their only product of any magnitude is the 15454, which comprises nearly all "optical" sales...and this is about 2% of the Cisco revenue monster. It's a place-holder to keep in with the Telcos.
re: UBS Sees Ciena & Huawei as Partners Whatever they do they need help at the customer interface side of things GÇô just tried their WWW site to look at their products, only to be faced with:
GÇ£Apache Tomcat/4.0.3 - HTTP Status 500 - Internal Server ErrorGÇ¥
Even more fun is the tech documentation link GÇô comes back with GÇ£404 document not found.GÇ¥
If they want to offer a challenge to the GÇÿbig fishGÇÖ it may be a good idea to sort out the customer interface first.. When was the last time the Cisco WWW site went haywire like above?
Would you buy 'mission critical' products from a company who can't run a WWW server?
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