Frank (or/and anybody else):
Could you comment on this post over on the Yahoo Ciena board? I thought both Sycamore and Ciena had the same type of restoration facets to their products, but this poster does not. Thanks
>>
It continues to amaze me how the "market" continues to be shortsighted in evaluating technology
companies such as Sycamore and CIENA. Whether Sycamore is valued to high or CIENA is
valued too low or something in between (my best bet), one thing is clear to me, the big difference
in market caps between CIENA and Sycamore makes absolutely no sense to me. Here's my
analysis...
Sycamore has a really nifty box called a transponder. Sycamore customers like Williams
Communications are now offering individual wavelength services. As I understand it, a wholesale
customer of Williams connects its network to a Williams POP. Then this customer connects its
ATM, frame-relay or IP switch to a digital cross connect which in turn links to a Sycamore
transponder (SN6000). This box coverts the customer handoff to a SONET framed signal onto a
OC-48 wavelength. The wavelength goes through a DWDM box and out onto the William's
OC-192 (10 G/sec) long haul network. In essence, the Sycamore box enables their customers
such as Williams to offer a whole new category of services based on leasing out individual
wavelengths from their network. There's no denying that this is a great technology and its no
wonder that carriers are buying Sycamore boxes by the basketful. The main problem though is that
this is an intermediate step in the evolution of the fiber optic network carrier business. These
wavelength services can only provide "unprotected" services, meaning that if there is a problem
with the Sycamore box or there is a fiber cut in the William's long haul network, the wholesale
buyer of the wavelength has to scramble around for alternatives...he might be using this set-up
already as part of a SONET ring so this scenario might already be anticipated. If not, the resulting
service would lead to extra costs for the wholesale customer's network or an unreliable service
(not really suitable for mission critial e-businesses). Point is, the Sycamore box does allow these
new type of services to be deployed but its just an intermediate step.
CIENA (with CoreDirector), Monterey, Corvis and others are working on the long term solution
to allowing carriers to get maximum use out of their DWDM expanded fiber assets. With this
switch, wholesale customers of the carriers will now be able to buy-on-demand individual
wavelengths that can be fully protected in the case of a fiber cut. Instead of costly SONET rings or
the unprotected wavelengths that the Sycamore box provides, CoreDirector will be able to
automatically switch the wholesale customer's signal to a different wavelength. CoreDirector will
also allow carrier's customers to buy various levels of service to meet their needs...protected,
unprotected, or restored over a period of time. Over time, wholesale or enterprise customers will
be able to access wavelengths on-demand for bandwidth intensive uses....a big video conference
for example...with minimal notice to the wavelength provider and basically automatically.
To sum up, my analysis is that despite Sycamore's big short term market opportunity to allow their
customers to offer unprotected wavelength services, it is the evolutionary products like CIENA's
CoreDirector that will finally enable CIENA's current and future customers to realize the full
economic value of their wavelength systems.
I've read in some places that CIENA's CoreDirector has a clear 6 to 9 month lead time on their
competitors...so if they can get this product thru some successful customer trials, the upside in
CIENA's business prospects would seem to be enormous.
Good luck to the long term shareholders in CIENA. Ignore the market maker swings in this stock
price. CIENA has a winning and visionary long term strategy and its valuation will reflect this over
time. <<
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