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DWDM

Nortel's Nasty Surprise

Nortel Networks Corp. (NYSE/Toronto: NT) delivered a blow that left Wall Street reeling after market close today: Citing unexpected delays in capital spending among North American carriers, the company slashed its guidance for the first quarter of 2001.

"The carriers are very nervous about their ability to get new capital," said CEO John Roth in a conference call with analysts late today. "We thought they'd go through this period for about a month, that after January things would clear up." Instead, he says, the carriers have changed the way they're doing business. They're counting "each and every dollar" and seeking to saturate their existing data infrastructure instead of investing in new gear.

As was the case in its last earnings call, (see Nortel Logs Good Quarter, Great Year), Nortel seemed reluctant to point to specific products and markets. Executives did, however, say that sales of optical circuit switching gear was going to be particularly hard hit in the quarter.

All this, Nortel says, has cut the legs out from under its revenue guidance to investors. Revenue growth expectations are now 15 percent for the first quarter of 2001, less than half the original estimate of 30 to 35 percent. Revenues are expected to be $6.3 billion, instead of the $8.5 to $8.8 billion originally set out in last quarter's earnings report. The company expects to realize a loss of $0.04 for the quarter.

What's more, the company says that in order to cut costs sufficiently to meet even these figures, it must lay off 10,000 people, or more than 10 percent of its present work force. Nortel announced in January that it would be laying off 4,000 people, roughly 4 percent of its work force (see Nortel to Cut 4,000 Jobs).

Nortel maintains that throughout all this, it won't be losing any market share. The overall U.S. market, executives say, will realize half of the 20 percent growth the company originally predicted.

The news is in stark contrast to the earnings report early today of Ciena Corp. (Nasdaq: CIEN), in which revenue guidance was raised substantially and executives claimed that visibility into future good fortune was better than ever.

Coincidentally, Ciena's key message this morning was that carriers were turning away from Sonet-based gear and embracing next-generation optical switches. Nortel's guidance reduction seems to bear this out -- at least in part.

Analysts seemed frustrated with Nortel, confronting Mr. Roth during a question and answer period with past reassurances about guidance (see Nortel Soothes Analyst Worries) and telling him the numbers didn't make sense. Some expressed concern that Nortel's numbers could be worse than anticipated.

Nortel wasn't helped by the logistics of the conference call itself: Apparently the overwhelming volume of calls swamped the conference provider, causing analysts to miss most of the first half of Roth's talk.

-- Mary Jander, senior editor, Light Reading http://www.lightreading.com

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netskeptic 12/4/2012 | 8:51:38 PM
re: Nortel's Nasty Surprise > The initial bandwidth capacity of this network
> segment will be on average 60 gigabits per
> second. The capacity can be increased up to 9.6 > terabits per second, based on customer demand.

I am wondering what is the current aggregate backbone bandwidth of other networks servicing the same region - I would be surprised if it is over 10G.

Thanks,

Aleksey
melao 12/4/2012 | 8:51:39 PM
re: Nortel's Nasty Surprise so brillouin, could you please shed us some light ?
big_fat_dwdm 12/4/2012 | 8:51:43 PM
re: Nortel's Nasty Surprise http://www.lightreading.com/do...
pingu 12/4/2012 | 8:51:44 PM
re: Nortel's Nasty Surprise Hi Brillouin,

Could you fill us in?

Thanks and Regards,
pingu
brillouin 12/4/2012 | 8:51:47 PM
re: Nortel's Nasty Surprise First, you shouldn't post heresay.

"And the ADMs used were Optera Connect DX. "

Wrong.

"The Optical transport (OADMs, Line AMPs, DWDM Couplers) were Optera LH 7."

Wrong.

"This Terabit Challenge that NT did was sorta not too real. Because, they've planned the spacing between the line amps and regens to be as optimized as possible for our system. I mean, Worldcom actually constructed some sites in the optimized space between the spans."

Very wrong...

pingu 12/4/2012 | 8:51:54 PM
re: Nortel's Nasty Surprise ...with more Nortel/Avanex DWDM systems?

http://www.360.net/News---Rele...

360NETWORKS LIGHTS UP MAJOR SEGMENTS OF EUROPEAN FIBER OPTIC NETWORK

German network segment ready for commercial service

Vancouver and London - 360networks announced today that it has lit 6,100 kilometers (3,800 miles) of its European fiber optic network. Spanning the United Kingdom, France, Germany and Holland, this network segment will soon provide seamless connectivity between 16 major cities including London, Manchester, Paris, Amsterdam, Dusseldorf, Berlin, Frankfurt and Hamburg.

A 3,000 kilometer (1,900 mile) section of the European network in Germany is ready for commercial service, pending German regulatory approval. The remaining sections in Western Europe are scheduled to enter service next month, while 360atlantic - the transatlantic cable between Europe and North America - is scheduled for service by the second quarter.

In addition, 360networks plans to light up a 3,000 kilometer (1,900 mile) segment connecting Denmark, Norway and Sweden in May. The entire 19,300 kilometer (12,000 mile) European network is on schedule to enter commercial service by the end of this year.

"This marks an important milestone in our aggressive European rollout of broadband and colocation services," said Ashwin Chitamun, vice-president of 360networks' European division. "Our lit network will provide our customers in Western Europe seamless connectivity to our extensive global network linking four continents."

The initial bandwidth capacity of this network segment will be on average 60 gigabits per second. The capacity can be increased up to 9.6 terabits per second, based on customer demand.

To ensure optimum network performance, 360networks' European Networks Operation Center in Maidenhead, United Kingdom monitors the company's global network 24 hours a day, 7 days a week.

Globally, 360networks is deploying a fiber optic mesh network that provides major competitive advantages, including scalability and flexibility. The advanced architecture enables the company to introduce new services and revenue streams more quickly, as well as provision services in hours - compared to the weeks it takes other carriers with traditional ring network architectures. 360networks also lights only the portions of the network it requires, resulting in greater efficiency and lower costs.

About 360networks 360networks (NASDAQ: TSIX and TSE: TSX) offers broadband network and colocation services to telecommunications and data-centric organizations. 360networks is developing one of the largest and most technologically advanced fiber optic mesh networks in the world. By mid-2002, the planned network will span 143,000 kilometers (89,000 miles) and link more than 100 major cities with terrestrial routes and submarine cables joining North America, South America, Asia and Europe. 360networks is also developing nearly 3.7 million square feet of network and server colocation space. More information is available at www.360.net.
pingu 12/4/2012 | 8:51:55 PM
re: Nortel's Nasty Surprise Thanks melao! Anyone else? eom
melao 12/4/2012 | 8:52:07 PM
re: Nortel's Nasty Surprise Let me try to share my knowledge... :)

"2) Poster melao says that Nortel has tested its 160-channel x 10Gps DWDM system on a live network on MCI/Worldcom (for a total of 1.6Tpbs). Was this another "Terabit Challenge"? Did NT's system pass? Can we expect them to be shipping to WorldCom? Again, does this system include Avanex's PowerMux?"

Yes the system passed. And the ADMs used were Optera Connect DX. The Optical transport (OADMs, Line AMPs, DWDM Couplers) were Optera LH 7.
As far as i know it doesn't have anything to do with Avanex.

This Terabit Challenge that NT did was sorta not too real. Because, they've planned the spacing between the line amps and regens to be as optimized as possible for our system. I mean, Worldcom actually constructed some sites in the optimized space between the spans. So it usually doesn't happen on real networks.
The fact is, the system IS carrying 160 wavelengths at 10Gbits, but it is working in an ideal case, where the line amps and regens are positioned as good as it could be.

"2)Petabit makes a good point that NT's 160 channel system (with 80 channels in each direction) may be better than 160/176-channel unidirectional systems because it provides an fully operational system on just one fiber (which many European carriers apparently only have?), whereas unidirectional systems need two fibers. BTW, does anyone know which contracts has NT won in Europe with this bidirectional system? Again, does this system include Avanex's PowerMux?"

The bidirectional system using 160 wavelengths is only deplyed in this network that i said on Worldcom.
But, there are older systems (32 wavelengths, 16 wavelengths) that are deplyed and they are bidirectional. Including a network here in Brazil that has 10Gbits in 32 channels. 16 one direction and 16 the other direction.

To make it clear. On NT's systems you either choose 2x (x the number of channels) in one direction or x in one direction plus x in the other direction.

I hope it clears up.



pingu 12/4/2012 | 8:52:08 PM
re: Nortel's Nasty Surprise Firstly, thanks for your answers and the interesting discussion which followed.

My (unanswered) questions are:

LUCENT
1) Is Lucent's new WaveStar OLS800G (320-channel DWDM system) based on Avanex's PowerMux? There have been intimations to that effect and I understand that Lucent has qualified Avanex's PowerMux, but do we know this to be the case? WaveStar certainly sounds like it has PM in there since it is configurable (2.5G x 320, or 10G x 80).

2) Is the WaveStar OLS800G still on track to be commercially deployed in Q12001?

3) Will Lucent's OC768 (40Gps) ULH system, which Harley (from Lucent) expects to be rolled out later this year, come at the expense of the WaveStar OLS800G product? Is PM a part of Lucent's ULH system? Can we expect strong PowerShaper sales if 40G is a Lucent priority, or can Lucent implement some other solution to deal with chromatic dispersion?

FUJITSU
1) We hear that Fujitsu's 176-channel/10Gps DWDM system, FLASHWAVE OADX, is shipping now. This system DOES incorporate PowerMux and we know that Fujitsu is a major customer of these. (Fujitsu was at least a 22% customer in Q1 (end-Sept) and bought around half of Avanex's PMux/PExchangers sold, or about $10 million worth.) Fujitsu's system has been tested by WorldCom, called the "Terabit Challenge".

2) Has FLASHWAVE, then, apparently met the "Terabit Challenge"? Is Fujitsu shipping FLASHWAVE to WorldCom? How about any other carriers? Which carriers are most likely to buy this system?

NORTEL
1) Do all of Nortel's high-channel count systems incorporate Avanex's PM? 80-channel x 10G? 160-channel? From the "Connectivity is King" issue of the Gilder Technology Report, we learn that "360networks has lit 10,000 of its 20,000 route miles in North America with 160 Nortel (NT)/Avanex (AVNX) waves at 10 Gbps." Is this the case, and if so, has Avanex booked these revenues but not yet billed them? How much revenue will Avanex realize from these sales? Is Avanex "half-done" with 360?

2) Poster melao says that Nortel has tested its 160-channel x 10Gps DWDM system on a live network on MCI/Worldcom (for a total of 1.6Tpbs). Was this another "Terabit Challenge"? Did NT's system pass? Can we expect them to be shipping to WorldCom? Again, does this system include Avanex's PowerMux?

2)Petabit makes a good point that NT's 160 channel system (with 80 channels in each direction) may be better than 160/176-channel unidirectional systems because it provides an fully operational system on just one fiber (which many European carriers apparently only have?), whereas unidirectional systems need two fibers. BTW, does anyone know which contracts has NT won in Europe with this bidirectional system? Again, does this system include Avanex's PowerMux?

Who else are we missing? What is Corvis' approach, for example?

Thanks and Regards,
pingu
brillouin 12/4/2012 | 8:52:17 PM
re: Nortel's Nasty Surprise "Okay, but if you want the advertised full duplex capacity of the NT system on a fiber pair then you actually need to buy two complete systems, right?"

Remember,

Everyone advertises capacity in the fiber, regardless of direction. So when you hear someone
say they have a 160 lambda uni-directional system it means that you need two systems to have a "full-duplex" system. This will give you 1.6 Tb/s per fiber, or 160 full-duplex channels, or 3.2 Tb/s TOTAL capacity on both fibers.

When you hear 160 lambda bi-directional (NT) it means that one fiber is carrying 80 full-duplex channels. This is one system on one fiber. If you have another fiber then you can come up with 160 full-duplex channels...still 1.6Tb/s per fiber, or 3.2Tb/s TOTAL capacity on both fibers. So it is the same capacity PER FIBER essentially, just getting there a little differently. The advantage is that for 80 channels (duplex) you only need one fiber, vs. for a simplex system, you still need 2 fibers in order to get 80 duplex channels.

The full duplex capacity advertised for NT as I understand it, is 80 full-duplex channels, 160 lambdas, 160 10Gb/s signals, etc. It's all the same. Is it safe to assume that "channel" means full-duplex as opposed to lambda/wavelength which means simplex?
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