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Is Verizon Giving AlcaLu the Long-Haul Boot?

Ray Le Maistre
10/26/2015

Alcatel-Lucent might be edged out of Verizon's long-haul transport network, with Ciena adopting a solo supplier status with the Tier 1 US operator, according to a report from experienced analyst Simon Leopold.

Ciena Corp. (NYSE: CIEN) was chosen for Verizon Communications Inc. (NYSE: VZ)'s long-haul network in 2010/2011 and had a clear run at the initial optical deployments before being joined at a later date by Alcatel-Lucent (NYSE: ALU). (See Verizon Readies 100G Launch in US and AlcaLu, Ciena Look Good for Verizon RFP.)

Now, though, according to Leopold, a managing director at Raymond James Financial Inc. (NYSE: RJF), AlcaLu is going to be "displaced" and Ciena is going to dominate.

"We think Verizon intends to abandon Alcatel-Lucent as a second source for its long-haul network and focus future investments toward sole-sourced Ciena," states the analyst in a research note issued Monday, who believes that Ciena's revenues will get a $40 million boost in 2016 as a result of the shift.

According to the analyst's sources, AlcaLu "struggled with technical issues and delayed deliverables… With the pending acquisition of Alcatel-Lucent by Nokia, we suspect operators are uncertain regarding Nokia's long-term commitment to invest in the possibly unprofitable Alcatel-Lucent optical unit," added the analyst, who also expects Ciena to pick up extra business from AT&T. (See AlcaLu Execs Lose Out as Nokia Unveils New Top Team.)

Verizon, Alcatel-Lucent and Ciena all declined to comment.

The suggestion that AlcaLu might be edged out of Verizon's network will alert other vendors to a potential opportunity to become the second-string supplier behind Ciena, even if Leopold does believe Verizon might be happy to commit to a single vendor. Among those that might want to know more are Infinera Corp. (Nasdaq: INFN), which is on something of a roll right now.

— Ray Le Maistre, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, Editor-in-Chief, Light Reading

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baznyankee
baznyankee
10/26/2015 | 5:12:33 PM
Re: Huawei on the ready?
I'll bet they would and we'll put you in charge of keeping them honest.
Sterling Perrin
Sterling Perrin
10/26/2015 | 4:56:20 PM
Re: Huawei on the ready?
I don't have information on whether or not this rumor is true - though Simon Leopold is well respected.

On the Huawei supplier possibility though, I can say with some confidence that this is not happening at Verizon, AT&T, or at other U.S. tier 1s or even tier 2s any time soon. Given the government position on Huawei in the U.S., the risks for these operators are too high. 

Huawei seems to have a very long term strategy for the U.S. though and continues to push - so I can't say never. Also, Huawei is a big supporter of ONOS, and so is AT&T, so I suspect that Huawei's ONOS influence is part of its long term U.S. strategy. For years, standards body leadership has been part of its overall strategy to gain market share.

Sterling
sowen557
sowen557
10/26/2015 | 4:13:53 PM
Huawei on the ready?
They would love a 2nd supplier shot and would slice about four zero's off the selling price.
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