Global net to buy gear from Ciena

Cable & Wireless picks fiber-optic switching equipment

$20 million-plus in sales

British firm intends to install devices in U.S., European cities

October 24, 2001|By Stacey Hirsh | Stacey Hirsh,SUN STAFF

Ciena Corp., the maker of fiber-optic equipment, said yesterday that a British telecommunications giant is buying one of the Linthicum company's products for its network, which spans Europe and the United States.

Analysts called the three-year deal with Cable & Wireless PLC of London a major win for Ciena.

Phil Green, senior vice president of Cable & Wireless' network technology group, said Ciena's product, the CoreDirector, is being installed in 17 cities in the United States and four or five cities in Europe, with the potential for more.

Initial sales are valued at $20 million to $25 million, Green said. "It's a very good platform technology," he said.

Ciena's stock rose on the news, closing yesterday up 61 cents at $17.32.

"You could say it's another feather in Ciena's cap," said Prospero Roda, an analyst for Global Capital Securities in Baltimore. "It's one of the carriers that everybody wants. It's one of your larger carriers."

The CoreDirector is switching equipment that recharges wavelengths of light as they move along a fiber-optic network. The equipment also protects the data being sent and reroutes information if there's a break in the network.

The equipment also pulls data together to send it across the network efficiently, and it can drop off data in cities along the way.

So, if hundreds of packets of data are going from Baltimore to New York, the CoreDirector could pull individual packets out and drop them off in Philadelphia.

"The market's pretty tight right now, so anytime you get a carrier that's doing a global build like this it's a pretty good deal," said Denny Bilter, senior director of marketing for Ciena. "You're talking about a global carrier here. Good solid company, good reputation around the world. We're very pleased."

Jay Ritter, a stock analyst who covers telecommunications equipment companies, including Ciena, for Morningstar Inc. of Chicago, said the deal for the CoreDirector indicates that the Linthicum company has strong momentum in that product line.

But even a big contract win, coupled with Ciena's recent rapid growth, does not change the environment in the telecommunications sector.

"The overall industry trend is still negative, and most likely the trend in their growth rate is still negative," Ritter said.

"They're continuing to outperform their peer group, but you're looking at an overall telecom equipment market that's going to be down roughly 15 to 20 percent next year. And in that environment, it's going to be difficult for them to grow at the kind of rates that they've seen in recent years."

One challenging task for Ciena, Ritter said, will be maintaining its leadership with the CoreDirector as competitors, such as Nortel Networks Corp., come out with rival switching products.

"This is a market that's expected to grow relatively quickly, despite the market downturn," Ritter said of optical switching. "But some of their competitors are making a big push to make up some of the lost ground, so that's going to be a challenge for Ciena."

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