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IMS

Is Cingular Cold on Sonus?

Cingular Wireless LLC may be reevaluating the role of (Nasdaq: SONS) in its VOIP deployment plans, a source close to the situation tells Light Reading. (See OnFiber Expands Into Cincinnati.)

This only adds to the recent Wall Street murmurs about how (NYSE: LU), which has been named as Cingular’s IP Multimedia Subsystem (IMS) contractor, could be pressuring Cingular to cap the use of Sonus switches at the core of the network in favor of its own Telica softswitches. (See Lucent Completes Telica Acquisition.)

“Due to interoperability concerns, we believe Cingular may be capping off deployments of non-Lucent VOIP suppliers,” says U.S. Bancorp Piper Jaffray analyst Troy Jensen in a note released to investors Monday.

A slowdown at Cingular could be very bad news for Sonus. While the carrier’s contribution to the Sonus bottom line tends to vary widely quarter by quarter, during the last two quarters it has been significant. Cingular contributed 41 percent of Sonus revenues in the second quarter and 35 percent in the third. (See Sonus Misses in Q3.)

Sonus spokespeople hadn’t answered requests for comment on this story at presstime.

Reports of the problems come just days after reports that Cingular is also having problems with the (NYSE: ALA; Paris: CGEP:PA) Spatial Wireless switching solution, which uses a (Nasdaq: TKLC) media gateway.

Sonus stock began dropping last Thursday afternoon, starting at a price of $4.20 and falling on high volume to $3.80 by midday Monday. Jensen told Light Reading the stock's downward movement could be attributable to someone catching wind of the goings-on at Cingular. (See Sonus Misses the Mark.)

Sonus's relationship with Cingular began when Cingular acquired AT&T Wireless for $41 billion in February 2004. AT&T Wireless had already begun deploying Sonus's VOIP equipment for tandem/trunking switching functions at the core of its network, and Sonus maintained that contract after the acquisition took place.

The Sonus gear even expanded into the Cingular network for a time after the merger. The vendor also captured a portion of Cingular's gateway MSC (mobile switching center) deployments, Jensen says. (See Sonus Chief: Come Fly With Me! )

But in October 2005, Cingular announced that Lucent had won its IMS contract, with the right to name the vendors that will supply the best-of-breed components in the IMS network. (See Cingular Picks Lucent for IMS.) In the IMS way of looking at these things, the softswitch is just one component that is expected to interoperate easily with all the rest. (See IMS: Simplify First, Add Apps Later.)

Light Reading asked Lucent whether it was exerting pressure on Cingular to use its Telica switches in place of Sonus's, reasoning that the Lucent’s Telica switches would integrate more smoothly with the rest of a Lucent-designed IMS network. (See IMS Guide.)

“We don’t comment on speculation,” says laconic Lucent spokesman Mike Alva.

Maybe Lucent won't. But others will.

“We believe Cingular's decision to deploy IMS-based equipment in the core of its network and concerns regarding equipment interoperability have caused the carrier to reevaluate current VOIP deployment plans," Jensen says in his note.

“The onset of IMS has resulted in much more of a blurring of the boundaries between the big legacy vendors from the carrier switch world, and the new softswitch companies,” says Heavy Reading analyst Graham Finnie. “They’re all moving toward IMS, and the IMS model is the same for everyone really.

“So certainly it poses some challenges to vendors that have built their business on being a dedicated softswitch provider for VOIP."

Sonus enjoyed an early advantage because it dedicated itself to building softswitches for VOIP networks. That translated into wide deployment of the softswitches and a solid track record. (See XO Leverages Sonus.)

But the way carriers buy softswitches is changing. Many believe voice service is becoming commoditized and that VOIP will soon be just one of many services delivered by the IMS network. As such, the criterion for choosing softswitches may be more about which vendor’s device is better engineered for the IMS environment, as opposed to which vendor makes a better softswitch. (See Cingular's Got Big FMC Plans.)

“The big Tier 1 service providers are creating these big-frame contracts and RFPs for networks based on IMS." says Finnie. "That means that they want an overall contractor to provide them with a soup-to-nuts type approach, probably bringing in lots of best-of-breed components from third parties. It is a slightly different approach from the way carriers have traditionally bought softswitches."

But it's also worth noting that Sonus's risks inside Cingular are very much up for debate. "By its own admission, Lucent doesn’t anticipate material IMS revenues until 2007, and as of now it doesn’t appear that trunking gateways is part of the deal," says analyst Eric Buck of Janco Partners Inc. "I don’t believe there is substantial [market share] risk to Sonus’s business with Cingular in the near to intermediate future."

Jensen maintained Piper Jaffray’s Market Perform rating on Sonus stock, pointing out that any loss of business at Cingular now wouldn’t be reflected in the revenue numbers for another two or three quarters.

Cingular is jointly owned by (NYSE: T) (formerly SBC) and (NYSE: BLS). (See Is an SBC/BellSouth Merger Next?)

— Mark Sullivan, Reporter, Light Reading

alchemy 12/5/2012 | 2:51:39 AM
re: Is Cingular Cold on Sonus? I think this article is total nonsense. Sonus builds class 4 tandem trunking solutions. IMS is a class 5 solution. As long as Sonus supports the codec set selected by Cingular for their IMS deployment, there are no huge technical issues. Sonus is already the incumbent in the network so it's up to the IMS vendor du jour to integrate with the Sonus SIP implementation and interoperate with the codecs in the Sonus media gateways. This is cellular so nobody has to deal with the truly difficult codec features like FAX, Modem, and TDD. Until Lucent gets tossed out, they're the IMS vendor du jour. The more interesting question is whether Sonus has advanced to the point where they have a viable class 5 VoIP solution for this kind of market. They clearly have to move in this direction to grow.
allidia 12/5/2012 | 2:51:38 AM
re: Is Cingular Cold on Sonus? What is it that you question? LU has added functionality to it's product and wants all the business it can get. The Telica product has had the 18 months it needed to get to Carrier Grade and it's ready now. (See SBC/BLS)

As for Eric at Janco
The typical timeframe for these deployments to be recognized as revenue is 9 months. Lucent Fiscal 2007 starts in September - about 9 months from now. Quite Logical that the "Material Revenue" wouldn't show till then.

As for SONS
It was once a Technology Leader in this field but they failed to recognize that they could never grow quick enough to support the large Carrier's. The BT loss should have led to SONS hiring an IB firm to seek an exit strategy but instead they had to concentrate on Accounting Issues. The slow pace of VOIP adoption enabled LU/ERICY/HUAWEI/CSCO and others to capitalize on IMS which makes Softswitches a commodity.

SONS future is unknown. BBJ reports there is no outside interest in acquiring SONS (Probably the 100+ PE). They could look to acquire a company but they will still not have the scale needed to penetrate Tier 1's as an integrator. They could sell to LU but how much would LU pay for a product line they are close to replacing? It's sad to see a once promising company going the way of Corvis.IMO
alchemy 12/5/2012 | 2:51:37 AM
re: Is Cingular Cold on Sonus? allidia writes:
The slow pace of VOIP adoption enabled LU/ERICY/HUAWEI/CSCO and others to capitalize on IMS which makes Softswitches a commodity.

There is no soft switch in an IMS architecture. The functions ordinarily done by a soft switch are decomposed into application and feature servers hanging behind the S-CSCF. As I've pointed out several times in the past, LU took a can of spray paint and scrawled IMS on some gear that in no way implements the IMS architecture. I also question that a pig of a company like Lucent could ever actually react to customer feature requests on a soft switching platform and get the features to scale and be stable. Could they have meetings to schedule meetings to discuss the functionality? Sure. Could they actually deliver? I'm dubious.

Ignoring the fact that LU isn't IMS.... A Telica soft switch doing class 5 apps will never be able to handle the tandem load of a Sonus soft switch doing the much thinner class 4 app. They're different products for different applications. The network is always going to be heirarchical and Sonus is the incumbent at doing the class 4 part.
materialgirl 12/5/2012 | 2:51:36 AM
re: Is Cingular Cold on Sonus? Could this be a symptom of the changing of the guard at Cingular, or SBC or ATT or what ever you want to call it? When SBC bought ATT, most of the senior ATT managers who perhaps make this type of decision left. The SBC guys, clueless as to how to run the IP network they just bought, then ran to comfy old LU to solve all their problems with a turn-key solution that may never work , but how would they know?
baba_curley_nanda 12/5/2012 | 2:51:35 AM
re: Is Cingular Cold on Sonus? I think some of what you said is right about the changing of the guard. SBC has certainly at a minimum sat on their hands with Call Vantage- supposedly the reaons their CEO said for buying ATT- they had the BLUEPRINT to implement VOIP network. Now you underestimate SBC and BLS ability to understand the soft switch but as far as IMS- your spray paint analogy is probably DEAD ON THE MONEY. LU is a stodgy slow moving company that designed class 5s for 20 years and could not write their own- hell the bought Telica when Telica sold in desperation since they were too late to beat SONS- LU was there only out and not one employee was happy about it to be sure it was purely to get what little money they could vs. no IPO at all and not enough money to stay solvent. Plain and simple Telica had decent HW but a bad SW team, the product is MGCP based not SIP based- they bought the SIP stack from DCL in 2002 or later..anyway SONS has a solid class 5, it should plop right in to a cellular app but cellular will not use class 5 VOIP until next gen chips come out which means CDMA with higher speed upstream in broadband and or the GSM next gen chips and only Europe is even beginning to use that so I see this whole debate as BS- its all vaporware and media spin by LU until the rubber meets the road- 2 years is an eon for telcos..for now all I am concerned is that this BS does not leak over to any global vision of a single class 5- being that Callvantage is rated best in class SBC->ATT would be foolish to say its not broke lets fix it with LU- can you say KABOOM boys and girls?? I knew you could, its called LU hot standby- KABOOM-SONS is light years ahead of LU- street does not get Tech, they just put target of 500 on GOOG-LOL can U say tech bubble or P/E??
Sons is worth 5 bucks for its Japan business alone..much less the AOL,Earthlink etc. from ISP side that will put fire under the RBOCs butt-if they fall asleep or let LU drive they are dead meat so let them be smart or they will do as they did with DSL- wait and get killed..
Baba
baba_curley_nanda 12/5/2012 | 2:51:34 AM
re: Is Cingular Cold on Sonus? So I suppose the 100 million Japanese subscribers- i.e. the entire COUNTRY of JAPAN will not provide SONS any revenue, nor AOL, nor Earthlink, nor GOOGLE or MSFT when they join or buy AOL, nor VZ nor ATT, nor Cingular- and we are talking only about next gen cellular- SONS class 4s are not going ANYWHERE dope..and I suppose that the hiring increase at SONS, the opening of HQ in India for R and D, the opening of interoperability center in Richardson is all just SONS doing stuff based on its projections before losing all the RBOCS-LOL, SONS is NUMBER ONE INT THE CARRIER CLASS VOIP deployments in the WORLD!! You are writing their obituary when their cash position grows by 20 million almost every quarter and DR is huge -like 100 million and growing, SONS only problems now are political ones and their CEO needs to be CTO and get a name brand CEO so the street will be able to GET THE REAL STORY- HA simply has been too damaged by the accounting stuff and the CC missteps. SONS is guilty only of bad accounting-hell NT cooked their books at least SONS just made a mistake. They have beaten out likes of NT at VZ and you think that LU is going to drop in Telica at sites they have been working at for 2 years now-LU certainly may eventually SELL A SINGLE deployement of their class 5 from Telica but as of now they do not HAVE ONE-LOL- NOT ONE and you are talking as if LU had all this major lead in VOIP- SONS competition is ERICY and Siemens and those cos. will never sell to the ISPs way SONS can sell IMS to AOLs and Earthlinks. L3 will be a huge co. soon and they are an ALL SONS shop...look for SPRINT to suddenly gain interest in buying LVLT I bet with all the cable business coming their way they may as well buy the capacity they will need to make money off cable wireless quadruple play and have the backpone for the future all IP network-can you say MPLS..can you say SIP- Telica needs 3 adaptor boxes to talk SIP sitting in front of it-very elegant solution.
allidia 12/5/2012 | 2:51:32 AM
re: Is Cingular Cold on Sonus? Either you had too many cups of coffee or your delusional. LR is right about you SONS people being CORV clones.

SONS might make 0.04 this year if lucky. At the market growth rate of 28% then they are worth $1.12 plus cash of $1.28 and you get $2.40.

This assumes they don't have to payout $100's of millions in class action suits against them.

$5 is a pipe dream.

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