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Verizon Does Enterprise Data

Confirming market speculation last week, Verizon Communications Inc. (NYSE: VZ) announced today that it is moving far beyond the local services it currently offers large corporate and government customers with its new Enterprise Advance initiative (see Verizon's Enterprise Boost).

Wall Street has been eagerly anticipating the announcement, hoping that it would mean a boost in capital spending that could help catapult some telecom equipment vendors -- and maybe even the industry at large -- out of its current depressed state (see Verizon Talk Stokes Stocks). In that respect, the announcement was a colossal disappointment.

Verizon largely just affirmed what everybody already knew -- that the telecommunications business is migrating gradually from revenues based on voice services to those based on data. Then it pointed out that a new focus on data services doesn't necessarily mean new spending.

“We don’t foresee a lot of major new [spending] here,” Verizon CEO Ivan Seidenberg said on a conference call addressing the announcement today. “This is an extension of our existing business… We already have capacity out there… We have a lot more facilities than people realize.”

Seidenberg also denied that the New York-based carrier was planning on buying other carriers or their facilities to expand its backbone. “In this environment, we can build it better and faster than by buying someone else’s legacy network."

The money issue was the largest disappointment, as leading data equipment stocks had ramped in anticipation of the announcement.

“The stocks have been over-hyped,” says George Notter, an analyst with Deutsche Bank AG. “Investors are looking for a reason to buy stocks this week whether the reason is real or not. This would have been the first time in a very long time that an RBOC was jacking up its capex.”

"All they did was re-bucket the money they already have in their budget,” says Network Conceptions LLC analyst Phil Jacobson. “It sounded like there’s hardly any money being spent.”

But while the announcement might be a big disappointment to investors and equipment vendors, the strategy could be a good move for Verizon. The enterprise space is a lucrative market. According to Eduardo Menasce, the president of Verizon’s enterprise solutions group, the market is currently valued at about $117 billion, and it should reach $170 billion over the next five years. Today, long distance accounts for about $35 billion of the enterprise market, he said, speaking on today’s conference call.

By offering new services like data storage, business recovery, network security, network management, and remote access, ultimately with a national reach, Verizon is looking to take a bite out of a market that has traditionally been dominated by large long-distance players like AT&T Corp. (NYSE: T), Sprint Corp. (NYSE: FON), and WorldCom Inc. (OTC: WCOEQ).

"After many years of all the ILECs talking about bundling services to customers, it’s finally starting to happen,” says i2 Partners LLC analyst Andrei Jezierski.

“This move allows them to compete head-to-head with players like AT&T and WorldCom and a company called Equant (NYSE: ENT; Paris: EQU),” says Jeff Kagan, an independent analyst based in Georgia. “This allows them to be… a national player.”

As several of the long-distance providers struggle with financial difficulties, Verizon has received federal regulatory approvals to offer long-distance services to about 90 percent of its customers, and the company says it expects to get the rest of the approvals by the end of the first quarter of next year. The carrier claims that it already serves nearly 10 million long-distance customers and that it’s the fourth largest long-distance provider in the country.

AT&T says it isn’t worried by Verizon’s push into its market space. “Good luck!” says Mike Jenner, AT&T’s vice president of managed services, in reaction to Verizon’s announcement. “They certainly don’t have the experience, and they also don’t have the assets."

Jenner scoffs at Verizon’s assumption that it can launch these services without spending a lot of money, pointing out that AT&T has spent about $35 billion on rolling out similar services over the past four years.

While Verizon will start off targeting customers in its traditional region, stretching from Maine to Virginia, it is also building out its backbone to serve markets in territories historically served by other regional Bells. Menasce says that the company will be interconnecting "islands," like Dallas, Los Angeles, Seattle, and Tampa, through a national backbone over the next 18 to 24 months.

Some observers say Verizon’s new enterprise strategy could be the first step towards truly differentiating among the different regional Bells.

Despite the lukewarm reaction, some data-equipment stocks remained warm following Verizon's conference call. Clearly, Juniper Networks Inc. (Nasdaq: JNPR) and Cisco Systems Inc. (Nasdaq: CSCO) are seen as the two hottest contenders for most of the edge routing portion of Verizon's data network. Juniper was up $0.079 (1.14%) to $7.00; and Cisco was up $0.70 (6.03%) to $12.31.

“This is positive from a sentiment perspective,” says Steven D. Levy of Lehman Brothers. “But we didn’t expect much out of this announcement. I think some investors were disappointed.”

— Eugénie Larson, Reporter, Light Reading
(Senior Editor Marguerite Reardon contributed to this report)
www.lightreading.com
ivehadit 12/4/2012 | 9:24:19 PM
re: Verizon Does Enterprise Data "i am long lucent"

thank you...me too.
BenGrahamMan 12/4/2012 | 9:24:24 PM
re: Verizon Does Enterprise Data >> Author: ivehadit Number: 7
Subject: Re: Verizon notes Date: 11/5/2002 2:26:55 PM


"if Verizon is looking for this build-out to be quick and effective, we fear that Nortel will be selected as the Metro DWDM provider."

bengrahamman, why the fear comment. are you affiliated with lucent?

<<

i am long lucent
ivehadit 12/4/2012 | 9:24:25 PM
re: Verizon Does Enterprise Data "if Verizon is looking for this build-out to be quick and effective, we fear that Nortel will be selected as the Metro DWDM provider."

bengrahamman, why the fear comment. are you affiliated with lucent?
light_rock 12/4/2012 | 9:24:25 PM
re: Verizon Does Enterprise Data I understand that data services are regulated differently than are voice services. So VZ now can offer "long-distance services to 90% of its customers." Anybody know if these services include data services as well? E.g., can VZ provide a long-distance Frame Relay service to connect enterprises in New York, Boston, and Dallas?

l_r
BenGrahamMan 12/4/2012 | 9:24:27 PM
re: Verizon Does Enterprise Data puddnhead wilson,

thanks for reading !!!!

here is some new stuff on it today

http://www.rbcpa.com/companies...

>> November 5, 2002 10:30 AM



More on Verizon



Industry sources are saying that the Verizon announcement will not increase capital spending, merely reallocate it. It is still possible that Verizon will actually cut its 2003 capex budget. We are under the impression that the carriers which will be affected most positively by this announcement will be Lucent, Cisco, Fujitsu and Nortel. We have read that the deployment and action will be quick. Verizon will focus the build on its Metro Ring between New York and Boston, along the I-95 corridor during first half of calendar 2003. The full backbone will take approximately 18 to 24 months. Verizon will access "cheap" long haul capacity, that is currently available, on a leased basis.



New equipment spending for this deployment will probably consist of Metro DWDM, ATM, Frame Relay, SONET , GigE and VOIP (Voice Over Internet Protocol). Previously, Lucent was awarded the exclusive DWDM from Verizon. Industry sources have stated that Lucents MetroEON performed poorly in Verizon's labs. This may give Verizon a reason to use Nortel in this quick build-out. Both companies are trying hard for the business. Lucent is asking for more time to show their products, whereas Nortel is pressing Verizon to let them do this metro build-out. We sure could use more information in this area. Nortel is currently Verizon's vendor of choice for enterprise customers. we hear that Lucent is working closely with Verizon on this one, but if Verizon is looking for this build-out to be quick and effective, we fear that Nortel will be selected as the Metro DWDM provider.



On the other hand, Lucent is Verizon's current key provider of ATM/ Frame relay services. With that, it is expected that Lucent would win most of that contract, followed by Alcatel. Lucent is also a main provider of SONET services, along with Fujitsu and Nortel. Nortel is limited in the region, so we expect much of the SONET portion to be awarded to Lucent. We do not expect Lucent to be the provider for GigE or VOIP.



Please keep in mind that most of the above is hearsay and speculation . We are not fluent enough or well enough "connected" to be relied upon the above discussion to be accurate.
<<




puddnhead_wilson 12/4/2012 | 9:24:30 PM
re: Verizon Does Enterprise Data thanks Ben
ivehadit 12/4/2012 | 9:24:32 PM
re: Verizon Does Enterprise Data its ridiculous to assert that existing facilities can just be diverted towards a major new business initiative and no new spending will occur as a result.

there will be spending on the new initiative. the only question is whether the rest of the network will continue on subsistence, or will it be upgraded as well...
BenGrahamMan 12/4/2012 | 9:24:40 PM
re: Verizon Does Enterprise Data http://www.rbcpa.com/companies...

November 4, 2002 7:00 PM


Verizon announces some changes


Verizon announced today that they would increase their capacity to supply data operations to large corporate and government customers. They apparantly did this to combat the decline in revenues that traditional telephone companies are seeing. Verizon will eventually provide network management, data storage, security, remote access, voice and data networking and optical networking. We read in an article , that Verizon was expecting to spend $1.0 billion on the infrastructure of this between now and 2005.



We see this as confirmation that voice is slowing and data networking is emerging. Carrier spending will migrate towards the data networking equipment sector. This should be a benefit to Lucent's ATM and frame relay products.



This is not necessarily great news for Lucent, as Verizon is expected to purchase existing capacity from other service providers. This also might slowdown the anticipated revenues on voice products.

Mech4 12/4/2012 | 9:24:40 PM
re: Verizon Does Enterprise Data They are gonna build it better and faster?

What, 18 months instead of 24. Wait til they start testing those routers. Talk about ill equipped.

I think these carriers really like to hear themselves talk - so self-important.
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