Verizon Talk Lifts Tellabs
Among others, Smith Barney Equity Research put out a note this morning analyzing a Tellabs victory at Verizon. "According to industry sources, we believe Tellabs has won a large multi-year contract with Verizon as a strategic vendor of edge IP/MPLS multiservice routing," writes analyst Alex Henderson.
Verizon and Tellabs, however, say they have little to add to the hubbub. "There isn't anything to confirm yet," says a Verizon spokesman. A Tellabs spokeswoman adds, "We haven't received any type of word from Verizon."
Whatever the case, Verizon's decision for its multiservice edge has already had an impact on the vendors in the space. Équipe is rumored to be closed, with Lucent Technologies Inc. (NYSE: LU) bidding on its remains, after having been in the running for Verizon's multiservice edge request for proposal (RFP) (see Équipe Forfeits Match).
Some time ago, Light Reading reported that Verizon's RFP called for a converged packet switch (CPS), useful for a Layer 2/3 network buildout that supports ATM (see Sources: Lucent Talking to Équipe).
Henderson writes that the deal is worth $100 million or more over several years. If Tellabs were to win the contract, it would be a huge feather in the cap of the Tellabs 8800 product, which it acquired from Vivace last year.
Already this year, Tellabs has been needled by analysts because the Vivace and Ocular products have yet to contribute meaningful revenues (see Tellabs Nabs Ocular and Tellabs Snags Vivace for $135M).
Tellabs recently said something that recast its data networking position, which is based on the 8800 and the company's 8600 Managed Edge System. In a meeting with analysts last week, the company said that data revenues would make up 25 percent of its total revenues in 2006.
A year ago, Tellabs didn't have any broadband data products. And in the first quarter of this year, only $4 million, or 1.5 percent, of the company's $264 million in revenues came from that segment.
That predicted jump in broadband data revenues may giving folks a means to handicap Tellabs' chances at Verizon. The company says its 8800 router is in trials with 30 carriers, but it has only announced three customers.
And, while investors are boosting Tellabs, they're throwing aged fruit at Ciena Corp. (Nasdaq: CIEN), which already has a multiservice contract with Verizon, by way of its DN 7000 product that came from WaveSmith. "The selection of Tellabs would give us further confidence that Ciena's role at Verizon will continue to be DSL aggregation, and other vendors, like Tellabs and possibly Alcatel, Cisco, and/or Juniper, will handle the multiservice IP/MPLS transport," writes Henderson in his note today.
Ciena shares fell $0.05 (1.39%) to $3.54 in trading on Tuesday.
Tellabs will be exhibiting in booth 24829 during Supercomm.
— Phil Harvey, News Editor, Light Reading