Defense Department Awards Networking Contracts -Sources
By Tom Becker (DOW JONES NEWSWIRES)
NEW YORK -- The Department of Defense will award Ciena Corp. (CIEN), Cisco Systems Inc. (CSC0), Juniper Networks Inc. (JNPR), and Sycamore Networks Inc. (SCMR) with contracts to build an optical network, sources told Dow Jones Newswires Friday.
The aggregate value of the four contracts is estimated to be between $800 and $900 million over two years. The Defense Dept., Juniper Networks, and Ciena declined to comment. Calls to Sycamore and Cisco weren't returned.
Ciena reportedly won a $150 million contract to build the optical transport system, said Hasan Imam, an analyst with Thomas Weisel Partners.
Imam said Sycamore Networks reportedly won the $50 million optical digital cross connect contract. Cisco beat out Lucent Technologies Inc. (LU) for the $50 million MSPP contract. Juniper Networks and Cisco are splitting the $150 million router contract, with Juniper working on the core router and Cisco on the edge router, sources said.
Imam said the news is "most positive for Sycamore since it emerged as a dark horse" in winning the contract. Shares of Sycamore surged 17% to $4.84 on volume of 4.9 million.
It's bad news for Corvis Corp. (CORV) which was considered a favorite to win at least a portion of a contract. Shares of Corvis are down 29% to $1.42 on volume of 45 million.
Lehman Brothers Inc. analyst Steven Levy said that if reports are correct, the news is a "huge positive" for Sycamore as it "reestablishes the company in its core market." Levy said the win for Cisco is a "positive surprise and also represents a negative event for Lucent, the supplier that we thought had the best chance of winning this business."
Lucent's shares were recently down 1% to $2.18. The telecom-equipment maker declined to comment.
The Defense Department wants to build its own next-generation optical network using Internet protocol routers. More than a dozen telecommunications-equipment makers bid on the pacts, known as the Gig-Be contracts, including Alcatel SA (ALA), Fujitsu Ltd. (J.FUT), Nortel Networks Inc. (NT), and Tellabs Inc. (TLAB).
The Defense Department began taking bids earlier this year and said it would award the contracts by the end of September. Some in the industry had feared the government would delay awarding the deals, moving expected revenue into the middle of 2004.
Corvis didn't return calls seeking comment.
The contract would be the first government contract for Sycamore Networks, a company spokesman said. The spokesman declined to comment on the news, saying Sycamore doesn't comment on potential business.
Much of Cisco's and Ciena's business comes through government contracts. In July, Scott Kriens, Juniper's chief executive, said the company is concentrating its efforts on obtaining government contracts for federal defense-related jobs.
Although the news is negative for Corvis and will likely act as a "negative catalyst for the stock," Imam, the Thomas Weisel analyst, said the company is in position to win other equipment contracts in 2004.
-By Tom Becker, Dow Jones Newswires; 201-938-2020
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Updated September 12, 2003 11:09 a.m. |
