Lightreading on MCLD contract:
FEBRUARY 07, 2001
PREVIOUS NEWS ANALYSIS
Ciena Lands $200M Deal With McLeod
McLeodUSA (Nasdaq: MCLD - message board) will spend $200 million over two years to buy
several of Ciena's optical networking products, both companies announced this morning (see
Ciena, McCleod Close $200M Deal ).
McLeodUSA is an unprofitable emerging CLEC (competitive local exchange carrier), which means
it's a notch below the trophy customer on the financial level. But the deal represents a significant
win for Ciena Corp. (Nasdaq: CIEN - message board) on the technical level. The optical
networking vendor beat several competitors to the deal, including Nortel Networks Corp.
(NYSE/TSE: NT - message board), Sycamore Networks Inc. (Nasdaq: SCMR - message board),
and Tellium Inc., which were all among the companies included in the original RFP, according to a
McLeodUSA official.
McLeodUSA is based in Cedar City, Iowa. It primarily serves the Rocky Mountain region, offering
voice and data services. It reported over $1.4 billion in revenue in 2000, but it is also largely
unprofitable and in debt. The company lost $500 million during 2000.
On the technology side, the deal is important because McLeodUSA has opted to build a
next-generation mesh backbone based on DWDM (dense wavelength-division multiplexing),
rather than selecting equipment based on a Sonet architecture. Several Ciena products, including
the CoreDirector switch, CoreStream transport product, and the LightWorks management system
will be used to build the network, according to both companies.
"Ciena's technical maturity in the industry and the feature sets on their CoreDirector and
CoreStream platforms were key selling points," wrote Robert Adams, director of network
planning at McLeodUSA, in responding to questions that were emailed to him by Light Reading.
The deal is not exclusive, however, according to Adams. "McLeodUSA will not be put into a
position of single vendor dependence."
"For us, what's important is you have a carrier basing its network on a new mesh architecture
instead of Sonet ADMs," said Denny Bilter, senior director of marketing with Ciena.
The deal was announced on the same day that Ciena raised a total of $1.5 billion in a combined
debt and secondary stock offering (see doclink 3564). Ciena shares were trading down 2.00
(1.78%) at 83, in late afternoon trading. |
