Ciena wins contract for network gear

British company buys product that expands one channel into 96

Initial order of $20 million

Equipment maker is trying to diversify its customer base

February 18, 1999|By Mark Ribbing | Mark Ribbing,SUN STAFF

Linthicum telecommunications equipment maker Ciena Corp. said yesterday that it has won its first contract to sell a new class of gear that will allow networks to carry significantly more phone calls and Internet messages.

The new contract, a three-year exclusive deal with British telecommunications company Telemonde Limited, calls for Ciena to provide equipment that will allow one fiber-optic channel to handle 96 channels' worth of communications traffic.

Previously, such dense wavelength division multiplexing products -- also known as DWDM -- could expand one channel into 16 or 40 channels on existing network equipment.

"Other companies have products capable of 96 channels or more, but the Ciena shipment is the first I'm aware of that can actually support that many channels," said William Magill, an analyst with NationsBanc Montgomery Securities LLC in San Francisco.

The contract with London-based Telemonde, which sells network capacity to other communications companies, could be worth $200 million to Ciena. Ciena said yesterday that Telemonde's initial order is worth about $20 million.

The Ciena equipment will be installed in Telemonde's Titan network, which will begin carrying traffic in western Europe in April.

"I think it's proof, really, of Ciena diversifying its customer base outside North America," Gary Smith, Ciena's senior vice president for worldwide sales, said of the Telemonde deal. "We now have 40 percent of our revenue, approximately, coming from Europe."

Ciena had been dependent on a narrow U.S. customer base, which spooked Wall Street and helped send the company into a protracted slump that included the renegotiation and cancellation of a proposed multibillion-dollar merger with Tellabs Inc.

As part of its recovery strategy, Ciena has latched onto the European telecommunications market, where deregulation and the emergence of new companies are stoking the demand for capacity-boosting network equipment.

In a separate announcement yesterday, Ciena said Global Telesystems Group Inc. of McLean, Va., has extended its agreement to buy Ciena equipment. A Global Telesystems subsidiary, Hermes Europe Railtel, was to stop receiving Ciena gear for its European fiber-optic network in April. That supply deal has been extended to April 2000.

Smith said Ciena has sold about $40 million worth of products and services under the Hermes contract and stands to gain another $40 million with the extension.

Ciena shares rose 81.25 cents yesterday to close at $22.3125.

Pub Date: 2/18/99

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