Government Still Plans To Award Telco Equipment Deals In Sept
Thursday July 31, 1:04 pm ET
By Tom Becker, Of DOW JONES NEWSWIRES
NEW YORK -(Dow Jones)- The Department of Defense Thursday reiterated its intent to award contracts estimated to be worth as much as $900 million to build an optical network by the end of September.
The news comes despite concerns among telecommunications-equipment makers that the government will delay awarding the contracts as it reviews proposals. More than a dozen telecom-equipment manufacturers have bid on the various contracts associated with the Defense Department's effort to build its own next-generation optical network using Internet protocol routers, including Cisco Systems Inc. (NasdaqNM:CSCO - News; CSC0), Lucent Technologies Inc. (NYSE:LU - News) , Ciena Corp. (NasdaqNM:CIEN - News) , Juniper Networks Inc. (NasdaqNM:JNPR - News; JNPR) and Corvis Corp. (NasdaqSC:CORV - News) . The five contracts are estimated to be worth between $800 million and $900 million over two years.
Many of the companies are hoping to land one or more of the contracts early enough in the year to allow them to realize revenue from the deals in the fourth-quarter. Several analysts on Wall Street have opined the contracts may not be awarded until the end of the year but on Thursday a spokeswoman for the Defense Information Systems Agency said the contracts were still on track to be awarded in September.
When the contracts are awarded, Nikos Theodosopoulos, an analyst with UBS Warburg (News - Websites), expects the government to spread the wealth and award each of the five contracts to a different vendor.
"We feel that while it may be cheaper for DISA to award all the optical products to one vendor, we believe the government will want to spread the business around given the difficult time in the economy and the telecom industry," Theodosopoulos said. "We expect the government to award contracts to different companies impacting jobs in as many states as possible. Thus, we believe there is an element of politics here as well."
Theodosopoulos expects Lucent to win the long-haul and optical switching contract. This contract, estimated between $150 million and $300 million, is the largest of the five. The UBS analyst said Corvis also has a good shot at winning the contract.
Theodosopoulos said Ciena is the likely winner of the optical bandwidth management deal. This contract is valued between $50 million and $75 million, the analyst said. Theodosopoulos expects Cisco to win the multi-service positioning platform contract and the edge routing contract, valued at up to $75 million and $35 million, respectively. The analyst said the core routing deal will likely go to Juniper. This deal is valued at $30 million to $35 million.
The UBS analyst's predictions are in line with those expressed by Lehman Brothers Inc. analyst Steven D. Levy earlier this month. At the time, Levy said the likely winners of the contracts included Ciena, Corvis, Nortel Networks Inc. (NT), Lucent, and Juniper.
Tom Becker; Dow Jones Newswires; 201-938-2020 |
