Ciena wins contract with Sprint Md. firm to provide capacity-boosting equipment for 3 years

Worth $100 million in 1st year

Lucent's rival version offers more channels but later availability


March 17, 1998|By Mark Ribbing | Mark Ribbing,SUN STAFF

Ciena Corp. said yesterday that it has won a contract to provide Sprint Corp. a new line of communications network equipment that will boost Sprint's network capacity by 250 percent.

The three-year agreement, which will be worth more than $100 million to the Linthicum-based company in its first year, sent Ciena's shares up $3 to close at $47.875 in trading yesterday on the Nasdaq market.

Ciena's MultiWave 4000 will expand one fiber-optic channel into 40 channels. Industry observers said the equipment will be the biggest capacity-boosting product put on the market yet.

Steve Chaddick, Ciena's senior vice president for products and technology, said yesterday's announcement "reaffirms our leadership role conclusively in this marketplace."

Ciena's claim to primacy has been severely challenged in recent months. In January, one of Ciena's toughest rivals, Lucent Technologies Inc., announced that it would bring out an 80-channel multiplier in the fourth quarter of 1998. Lucent's product wasn't due to come out for months, but the announcement was enough to send Ciena's stock into a tailspin.

Ciena officials said yesterday that, at first, their new technology is less powerful than what Lucent is promising, but it will be ready in weeks rather than months. Sprint is scheduled to begin deployment of the Ciena product next month.

In a pointed reference to Murray Hill, N.J.-based Lucent, Chaddick said, "The fact that we're shipping products is clearly different from shipping press releases."

Ed Mullane, an analyst for New Japan Securities International Inc. in New York, said the introduction of a product that can turn one fiber-optic channel into 40 "shows that Ciena can stay on the technology curve. After the Lucent announcement, there was some doubt whether Ciena can continue to pump out improvements in product at the same rate that a company with Lucent's resources can."

Neil Grenfell, Sprint's vice president of engineering, said the Ciena deal "will allow us to meet the rapidly increasing demand of our customers." With the explosive growth of the Internet and other communications technologies, the need for network capacity has increased.

Ciena equipment boosts that capacity by taking the light waves that zip along fiber-optic lines and breaking them into smaller parts, each part representing a new channel.

Ciena officials said the MultiWave 4000 has the capacity to be upgraded from a 40-channel multiplier to a 96-channel multiplier, and that upgrade could eventually allow Sprint to carry approximately 3 million phone calls simultaneously over a single two-way line. According to Chaddick, the technology that enables the upgrade should be ready by summer.

Randy Carlson, an analyst for the Yankee Group in Boston, said the Ciena deal will likely be an expensive way for Sprint to keep up with the demand for capacity. "Sprint has been very conservative in laying new fiber," he said. "They could probably make use of a 40-channel system on some routes. The overhead is going to be very costly."

Ciena and Sprint did not disclose the precise terms of the contract, but Chaddick said it will be worth more than $100 million over the next year.

The two companies already had a relationship; Sprint has been using Ciena's 16-channel multiplier since early 1996.

Lucent confirmed that it was one of the companies that had competed for the Sprint contract. Kathy Szelag, the director of strategy for Lucent's Optical Networking Group, said her firm still hoped to get a piece of the Sprint pie. "We anticipate they'll have at least two vendors," she said.

Sprint's Grenfell confirmed that. "Ciena will not be an exclusive provider," he said.

Pub Date: 3/17/98

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