Is Ericsson Exiting Optical?

Sources in Europe say Ericsson AB (Nasdaq: ERICY) is halting development on its optical networking products, including its ERION line of DWDM metro and long-haul transport gear.

"They appear to think it's common knowledge," says one financial manager, who asked to stay unnamed.

Other sources close to Ericsson say the company has already signed a deal to OEM a line of DWDM gear from Marconi PLC (Nasdaq/London: MONI) but has held off announcing anything due to concern over Marconi's financials.

Sources say the deal makes sense from Ericsson's viewpoint since Ericsson already OEM's SDH gear from Marconi through a contract signed four years ago.

Ericsson, as ever, is tight lipped. "We are constantly reorganizing," says spokesman Mads Madsen. He refuses to confirm or deny what he calls "speculation" about the company's optical products or any possible deal with Marconi.

Marconi too won't respond to rumor regarding Ericsson.

But there's this: The systems division at Ericsson, of which all the company's telecom products are part, saw a 40 percent reduction in revenues during the first quarter of this year, compared with last year's first quarter (see Ericsson Reports $290M Loss).

Ericsson's regrouped its Mobile and ENGINE core and access systems into a new business unit (see Ericsson Reorganizes). The company says present opportunity lies in services and equipment to help carriers -- particularly ones with wireless facilities -- move circuit-switched legacy networks to packet-based ones, using Ericsson's ENGINE gear, which includes broadband circuit-based switches, access equipment, and ATM gear.

But ERION products have gone unmentioned, left out of the lifeboat.

Ericsson confirms the ERION products weren't put into the new group with the ENGINE and mobility gear but instead have remained under its transport and transmission networks division.

Meanwhile, it's been well over a year since the last publicized contract win for ERION, with Finland's incumbent carrier Sonera Corp. Separately, Ericsson is also said to be mulling the sale of its other optical division, Ericsson Network Technologies, which is part of its "other operations" group and specializes in fiber optic cabling and telecom network installation and integration (see Ericsson May Jettison Troubled Units).

— Mary Jander, Senior Editor, Light Reading
http://www.lightreading.com