Sycamore Spreads Its Roots

On its first quarter 2001 conference call two days ago, Sycamore Networks Inc. (Nasdaq: SCMR) promised investors new customers (see Sycamore Raises Forecasts). This morning it delivered the goods, by announcing a multiyear agreement worth up to $40 million with Vodafone Ltd..

The deal calls for Vodafone, a European mobile telecommunications company and one of the largest telecom companies in the world, to buy several pieces of Sycamore’s intelligent optical switching and transport products and services. These products include the SN 16000 intelligent optical core switch, SN 3000 optical access switch, SN 8000 intelligent optical transport platform, and SILVX optical network management system, for deployment within Vodafone’s U.K. network. Product deployment will begin in the first quarter of 2001.

The SN 16000 and SN 3000 are two of Sycamore’s newest products. The SN 16000 is the core optical switch developed internally, while the SN 3000 is a metropolitan-area access switch that originally came from the Sirocco acquisition. Both products combine the BroadLeaf Network Operating System signaling and routing software with hard optic technologies.

The deal comes at a critical time for Sycamore. A year after going public, its market capitalization has skyrocketed to $18.6 billion, and revenues are up over 500 percent from last year. It has announced other customer wins, such as its deal with a division of BellSouth Corp. (NYSE: BLS), but most of its revenue is still coming from one customer, Williams Communications Group (NYSE: WCG) (see Sycamore Rings Up BellSouth). As Sycamore hits the next plateau in development, a broader customer base is needed to justify the high valuation, say analysts.

“We said when we went public that we were going to announce one to two customers a quarter,” says Rick Thompson, director of product marketing for Sycamore. “And we have, which shows that we have been able to execute on our plan.”

Sycamore also announced the 2.0 version of its BroadLeaf management software today. The new software will extend the management reach from the core product out to the access network, says Thompson, and will also be shipped with Vodafone’s deployment.

Sycamore was trading down nearly $2 today, at $67, 2 percent off yesterday's price.

-- Marguerite Reardon, senior editor, Light Reading, http://www.lightreading.com

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