Ciena lands a rich deal

Firm's equipment will be used to light AFN fiber network

November 08, 2001|By Stacey Hirsh | Stacey Hirsh,SUN STAFF

An Oklahoma-based telecommunications company said yesterday that it will use Ciena Corp.'s equipment to build part of its North American network.

The deal is worth tens of millions of dollars, according to the Tulsa, Okla., company, AFN Communications.

AFN has 8,000 miles of network fiber in 13 Northeastern states, including Maryland. Of those, only 2,000 miles are "lit," or running.

Through the deal announced yesterday, AFN will use Linthicum-based Ciena's telecommunications equipment to light some of the remaining miles of fiber. And AFN plans to use Ciena equipment to eventually light the rest of the network, said Jack Biery, vice president of engineering and construction.

"They are our selected partner, and for the foreseeable future I don't see us doing this scale build-out with any other vendors," Biery said.

At a time when the economy is widely believed to be in a recession, the new contract is a plus for Ciena.

"The net of it is definitely a positive," said Rick Schafer, a research analyst for CIBC World Markets. "It's another data point to validate Ciena's strategy as a one-stop-shop for next-generation optical network gear."

Jay Ritter, a stock analyst who covers telecommunications equipment companies for Morningstar Inc. of Chicago, said that "obviously there's a good bit of nervousness about Ciena's quarter ... so every contract they can pick up is good."

One concern is that some of Ciena's bigger customers have announced cutbacks, Ritter said. He added that, despite the fact that the company seems to have its product line in order, "it's just a pretty tough environment."

Indeed, UBS Warburg lowered its revenue and earnings estimates for Ciena yesterday, noting that customers have recently cut capital spending.

Ciena's equipment - the CoreDirector, CoreStream and MetroDirector K2 - will allow information traveling on pulses of light to be sent around AFN's network. It will allow the network to add or drop off traffic at particular points and move efficiently.

Ciena spokesman Glenn Jasper said it's extremely rare in the telecommunications industry for a carrier to purchase all the equipment for its network from one vendor, and the deal gives Ciena "a pat on the back when it comes to our ... architecture."

Shares of Ciena rose on the news, climbing $1.16 to $17.40.

Privately held AFN Communications chose Ciena for the partnership because the local telecommunications equipment maker is small and nimble, and "we just thoroughly love their product," Biery said.

Schafer of CIBC World Markets said of the deal: "It shows Ciena's still winning new business and finding new customers, but at the same time, it's not exactly like winning an AT&T. So it's a smaller win."

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