Sources: Tellabs, Lucent Score ROADM Wins
Sources at OFC/NFOEC this week say Tellabs has won second-source status at AT&T Inc. (NYSE: T) for its reconfigurable optical add/drop multiplexing (ROADM) technology, while Lucent, via its technology supplied by Movaz Networks Inc. , has won a similar distinction at Verizon Communications Inc. (NYSE: VZ). (See OFC: Optics & IPOs.)
These new wins could be taken as a sign that the ROADM space is inching towards maturity in North America. The devices allow the automated provisioning of wavelengths at optical nodes, removing some of the time and truck rolls required to make service changes. Hundreds of millions of dollars have been flushed into the ROADM space in the past several years, with only a few marquee contracts -- and a few dead or stagnant startups -- resulting.
Analysts previously pegged Fujitsu Ltd. (Tokyo: 6702; London: FUJ; OTC: FJTSY) as the likely winner of the majority of the ROADM business at SBC, now AT&T. They said the door remained open to a second-source vendor. That now appears to be Tellabs. (See AT&T Shines a Light on Lightspeed.)
That second-source opportunity looks to be significant. "We believe over time AT&T may look for a second source to Fujitsu which could open up 7100 opportunities for Tellabs down the road, and note this deployment underscores our views about the emergence of the ROADM market in 2006/2007," Lehman Brothers analysts wrote in a February 1 research brief. (See ROADMs Roll On.)
The news comes at a good time for Tellabs. The company’s stock shed a few points following the announcement of AT&T’s upcoming merger with BellSouth. BellSouth has been a Tellabs fiber gear customer for some time.(See Will AT&T Value BellSouth's Vendors?)
Tellabs, however, isn’t saying anything about the AT&T contract now. “Our competitors would love to know that, so we don’t discuss industry rumors for that reason,” says Tellabs spokeswoman Ariana Nikitas. (See ROADMs: Almost Famous.)
The choice of Lucent as second-source vendor at Verizon comes as a bit of a surprise to analysts. Heavy Reading analysts at one time expected Cisco Systems Inc. (Nasdaq: CSCO) and Meriton Networks Inc. , which purchased Mahi Networks' assets, to vie for that position. (See Verizon's Optical RFP: The $1B Question.)
Light Reading reported September 19 that Tellabs had won primary ROADM supplier status at Verizon -- also a suprise victory. (See Tellabs Running ROADMs at Verizon .) Analysts had previously forecast Fujitsu as the likely winner for that deal.
The new ROADM business at Verizon was outlined in a series of optical RFPs released by the carrier last summer. The ROADM RFP said the right product for the job would integrate "wavelength and Sonet transport and switching capabilities into a single element."
Heavy Reading chief analyst Scott Clavenna expects the ROADM portion of the Verizon contract to be worth about $200 million.
Movaz CEO Bijan Khosravi says he can't comment on the Verizon contract, but says that his company's OEM partner, Lucent, is probably in discussions with the carrier. Movaz provides the ROADM technology for Lucent's Metropolis Wavelength Services Manager (WSM) optical networking platform, Khosravi says.
“Our relationship with Lucent is significant," Khosravi says. "Greater than 20 percent of our revenue came from Lucent last year. They have won 17 different accounts with our product and have been pretty active with the WSM product."
Lucent did not return calls for comment on this story.
These latest ROADM developments are a good sign for ROADM vendors, especially since the technology's adoption has been slow due to the gear's overall costs. As more ROADMs are deployed, prices will drop, opening the way for smaller carriers to get in the game.
AT&T and Verizon both declined to comment on this story.
— Mark Sullivan, Reporter, Light Reading