Tellium's Big Score

A week after it announced commercial shipment of the largest optical switch on the market, Tellium Inc. today announced a multimillion dollar deal with Cable & Wireless (NYSE: CWP) (see Tellium Ups the Ante). The global service provider has agreed to buy a minimum of $350 million worth of Tellium’s optical switching products for deployment in its IP network over the next five years.

Big deal? You bet it is. Cable & Wireless is the first top-tier provider to commit such a huge amount to the deployment of optical switches, according to Dana Cooperson, director of optical networks at RHK Inc. “I can’t think of any other deal that comes close,” Cooperson says.

Sycamore Networks Inc.'s (Nasdaq: SCMR) contract with 360networks Inc. (Nasdaq: TSIX; Toronto: TSX.TO), announced in July, was for up to $420 million, but that sum also covered the purchase of dense wavelength-division multiplexing equipment (see Sycamore Ships Its Optical Switch). Sycamore hasn't disclosed how much of the $420 million is being spent on its SN16000 optical switches.

Judging from the terms of the Tellium contract, Cable & Wireless seems anxious to get their Aurora switches in its networks. It has only tested the equipment in Tellium's lab.

“That was something that surprised me,” says Cooperson. “I think that indicates that they [Cable & Wireless] were feeling pretty comfortable with the products.”

Another important point to note is that this was a “no strings deal,” meaning that Cable & Wireless has no investment in Tellium and was given no equity as part of the agreement. Additionally, the carrier will buy the equipment outright -- without any provisions made for financing.

“We closed this deal completely on our own,” says Harry Carr, chairman and CEO of Tellium. “No vendor financing, no equity. We won this account on our own merits.” The Tellium products to be shipped to Cable & Wireless include the Aurora Optical Switch (both 32-port and 512-port models), the StarNet routing and restoration software, and the Wavelength Management System. Field deployment within Cable & Wireless's global IP network is expected to begin in the first quarter of 2001.

With such a big deal under its belt, analysts are getting antsy for the company to go public. "It makes you wonder," Cooperson says. Tellium wouldn't comment on its plans, if any, for an IPO.

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

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