Network Gearmakers In Flux
By Evan Blackwell
from the June 18, 2001 issue of Broadband Week
The attempt to pull off a monster merger between Alcatel and Lucent Technologies finally caved in late last month, with both companies backing out of the deal. That doesn't mean big changes and corporate restructuring are not still in the cards for the network equipment business.
Vendors still are trying to wait out the market storm, and strategic company-wide shifts continue to change the telecom gear landscape. Whether it is Alcatel, Lucent, or fellow giants Nortel Networks and Cisco Systems, trying economic times tend to bring consolidation and divestment. That prompts corporate managers to consider colossal deals like Alcatel-Lucent, and creates an environment where many such combinations may be talked about.
"When economic times get tight, it almost becomes like Darwinism," says Charles Hartfelder, director of public networks marketing for optical fiber and components manufacturer Corning. "Sometimes you can achieve greater synergies, but consolidation has to make sense for the product lines and business plans."
One optical network newcomer that continues to look better and better with each quarter is Maryland-based firm Ciena. Even as larger competitors stumble through the current business slowdown, the dense wave division multiplexing systems maker has gotten a reputation for making all the right moves in a way that might seem reminiscent of how Cisco was viewed not too long ago.
But according to former Ciena CEO and new executive chairman Pat Nettles, his company wants to avoid the type of strategies that epitomized Cisco, such as significant growth through acquisitions.
"Right now we're seeing the big vendors demobilized because of all the ineffective acquisitions," said Nettles. "That creates an opportunity for a company like Ciena. I don't think you're going to see tens of acquisitions coming from us. We're in a business where value is tougher to analyze in acquisitions."
Ciena's MultiWave Metro fiber-optic transport system has taken advantage of the service provider market's heavy interest in the metro optical business, and has achieved what analysts consider impressive traction with service provider customers. In May, AT&T signed on with Ciena and now is using MultiWave in the Los Angeles area. Also last month, Ciena reaffirmed its 2001 guidance of 95 percent revenue growth for the rest of the year and reported $425 million in revenue for the second quarter.
Earlier this month at SUPERCOMM, Ciena again was the darling of media and analysts when new CEO Gary Smith again reaffirmed its third quarter financial guidance and showed off new capabilities for the MultiWave CoreStream optical system. The CoreStream platform will employ a two-phase approach to ultra-dense channel spacing to more than triple network capacity to 3.2 terabits per second on an individual fiber and in a single transmission band.
"We've been very astute about the products and the technology we've rolled out," Nettles says. "This is not a business about technology. It's a business about revenue streams."
CoSine Communications, the three-year old California creator of a new IP services platform suddenly gaining attention from service providers, understands motives driven by market pressures. CoSine has been the subject of recurring rumors in recent months, indicating the company was a prime takeover target of Cisco. Larger vendors already have snapped up some of CoSine's former competitors in the IP service switch market, with the most notable example being Lucent's purchase of SpringTide last year.
"The way we like to judge our success is by the traction we make with our customers," says David Messina, CoSine's director of product marketing. "That's always going to be the first priority for us."
Peter Evans, vice president of marketing for Nortel's local Internet division, says consolidation among the equipment vendors isn't over. "Every vendor and every service provider is always looking at a changing landscape," Evans said as he perused the show floor earlier this month at SUPERCOMM. "The potential for mergers and partnerships is still there. Look out here (at the SUPERCOMM exhibit floor) and you see about 300 vendors in the metro optical space alone. Market economics will tell you that it can't support that many vendors."
|
