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Optical/IP

The Ciena Theory

8:10 AM -- Regarding Nortel Networks Ltd. 's Metro Ethernet Networks group, the M&A chatter now turns to Ciena Corp. (NYSE: CIEN).

"Fujitsu and Ciena make the most sense to us. By the way, please don't bring up Sycamore," writes Mark Sue of RBC, in a note to clients today. "Fujitsu can bulk up its market share while Ciena gains a stop gap product line until their 100G optical product gains more meaningful traction."

Sue points out that, while Ciena could use Nortel's optical networking customer base and its 40-Gbit/s product portfolio, it's too small to get swept up in a bidding war against NSN or some other vendor in the space.

"Ciena can expand the opportunity by considering what Nortel wants. In our view, it's not just the highest bid," writes Sue. He notes that Ciena should carefully articulate its intention to buy Nortel's assets, its commitment to the market, and provide "some assurance that the employees will be taken care of."

Providing that kind of clarity might be worth as much to Nortel as a bigger bid from a bigger company, Sue says.

— Phil Harvey, Editor-in-Chief, Light Reading

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jggveth 12/5/2012 | 3:58:36 PM
re: The Ciena Theory

Don't count out Cisco.  I think they come in at last minute with the biggest bid.  40G is hot in Metro and NT has the best Tech by far.  With Packet Optical getting bigger, NT would really help Cisco compete. 

Sterling Perrin 12/5/2012 | 3:58:36 PM
re: The Ciena Theory

I think Ciena was also floated as the most likely suitor in WSJ too. But I just don't see how this makes much sense for Ciena. The CN4200 competes directly against the OME 6500 so there is complete overlap there. In LH DWDM, Ciena is stronger than NT already. And for 100G, Ciena seems to be quite far along with its own R&D - in fact Ciena announced a commercial 100G win, and NT has not had one.


Ciena bought World Wide Packets for PBB-TE, so doesn't need that. Both Ciena and NT are strong in North America, so I don't see what Ciena gains geographically either. I'm just not sure what the big incentive is here for Ciena.


Does anyone have a compelling argument for this deal?


Sterling


 


 

paolo.franzoi 12/5/2012 | 3:58:36 PM
re: The Ciena Theory

 


Cisco has been slowly backing away from optical since the bubble burst and was pretty strongly rumored (okay I had it pitched to me) selling the 14454.  Given the horrible margins in the Optical Space, why would Cisco enter?



As for Ciena, they seem to like to acquire but this seems like a REALLY big chunk for them to get.  It would be a complete corporate transformation.  Not sure they are ready for it.  Doesn't mean they won't do it, just that they are really likely to butcher it.


seven


 


 


 

AutoDog 12/5/2012 | 3:58:35 PM
re: The Ciena Theory

>>> NSN was early with 40G but product is no good.


The world's largest carrier thinks otherwise. AT&T's nationwide 40G backbone is exclusively NSN.


 


-AD

AutoDog 12/5/2012 | 3:58:35 PM
re: The Ciena Theory

>> Don't count out Cisco.


I just don't see Cisco wanting to repeat what's happened with the Pirelli optical transport product line... A business unit that is by most accounts the red-headed stepchild in the Cisco family.


 


-AD


 

jggveth 12/5/2012 | 3:58:35 PM
re: The Ciena Theory

The Juniper/NSN JV is another possibility.  NSN was early with 40G but product is no good.  Also helps Juniper with their lack of packet optical story.


The bigger point is that Ciena will prob open the bidding but will likely end up outbid by those with deeper pockets. 

photon2 12/5/2012 | 3:58:34 PM
re: The Ciena Theory Ummm, let's see. Ciena's success with Internet Photonics, NOT. Success with WWW...NOT. If they actually bought NT, NT would wag Ciena's butt.
P2
jggveth 12/5/2012 | 3:58:34 PM
re: The Ciena Theory It is my understanding that AT&T's build with NSN is finished. That they more or less decided to deploy NT for the next generation of 40G but then delayed this as part of plan to cut capex in 2009. I think they will revisit in 2010 and whoevere owns NT assets will have the inside track.
paolo.franzoi 12/5/2012 | 3:58:34 PM
re: The Ciena Theory

Just FYI, AT&T is not the world's largest carrier.  I am sure soon (if not already) it will be someone in China.  Last I checked it was NTT.


seven


 

opticaljunkie 12/5/2012 | 3:58:33 PM
re: The Ciena Theory

Way before NSN, AT&T already had 40G deployed using I believe NEC's solution, that was about 6 or 7 years ago. AT&T deployed a lot of NSN's 40G (stratalight -> opnext), but performance is not comparable to nortel's coherent 40g. 


Ciena's 100g win is more marketing than anything. The solution will be 2 pol rz-dqpsk with external optical polarization tracking. If you've seen the actual line card, you'll understand why nortel's upcoming 100g is more elegant. Both 100g solutions should be released soon, we'll see which one is deployed in higher volume. 

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