Smith Barney on the new MPLS Edge Router.
OPINION
Nortel Dives Into The MPLS Edge Router Market, A Promising New Wireline
Category And One That Had Threatened To Obsolete NT's #1 Position In L2
Switching
Today Nortel announced the Multiservice Provider Edge (MPE) 9000 platform, a
product family that over 200 Nortel engineers have spent the past year
developing. Multiservice edge routing is a relatively new product category
driven by carriers' strategies to collapse their multiple purpose
built/single service networks into single all-service/converged networks.
Multiservice edge routers/switches are designed to take various legacy and
next-generation services including Frame Relay, ATM, and Ethernet coming from
the customer location and package them into MPLS format so they can be handed
off and transported across a carrier IP core. Nortel has traditionally been
strong in Layer 2 data such as Frame Relay, ATM, and Ethernet having, for
example, over 35% global market share in Frame/ATM switching and industry
leading Optical Ethernet offerings. However, until today's announcement, a
serious concern for Nortel had been its lack of Layer 3 (IP/MPLS) support as
carriers around the world are clearly transitioning from a preference for
Layer 2 data transport to Layer 3 transport.
The Multiservice Edge Has Attracted A Lot Of Competitive Attention And While
Nortel Is Late To Announce A Product They Still Have The Market In Front Of
Them. While we believe there is a near universal consensus among carriers
that multiservice routers will feature prominently in their next-generation
converged networks, purchases of these products are in their relative
infancy. Nonetheless, anticipating 20%+ year-over-year growth in the
category, there has been a large amount of vendor activity in the space. On
the Layer 3 router vendor side, Juniper recently introduced the M320 router
and we expect Cisco will likely introduce enhancements to its 7600 router
line with increased multiservice capabilities. Within the past 18 months,
Alcatel and Tellabs acquired start-ups TiMetra and Vivace Networks,
respectively, which each developed Layer 3-based multiservice edge routers.
At least two other start-ups are active in this space, Hammerhead Systems and
Laurel Networks, and Laurel has a sales and marketing agreement with CIENA.
CIENA also acquired WaveSmith, which makes a multiservice edge box but
approaches the problem more from a Layer 2 perspective. We believe Nortel's
MPE 9000 also starts from Nortel's strength, which is Layer 2, but Nortel has
relied on a third-party company called Nexthop Technologies for Layer 3
routing code in the MPE 9000. Lucent, which had traditionally been a strong
Layer 2 player, appears conspiciously absent from the multiservice edge
market, but they do have a partnership with Juniper based on addressing this
space.
Nortel Says The Introduction Of The MPE 9000 Should Strengthen Its Core
Routing Partnership With Avici. In the new data network architecture, edge
platforms must be able to handle a large number of diverse service types and
convert them into MPLS frames. Core routers, on the other hand, are simply
expected to handle high capacity IP/MPLS transport. In the core IP space,
Nortel is selling Avici routers. Avici is a small start-up with about 5%
global market share of the core 10Gbps routing market. While Nortel would
clearly like to become an end-to-end router vendor based on the MPE 9000 and
Avici, we think it's more likely that carriers using Nortel Passport ATM
switches and Shasta broadband aggregation products will likely upgrade to the
MPE 9000 while generally retaining Cisco and Juniper, whom combined
absolutely dominate the router market, in the core.
Some More Information On The MPE 9000 Family. Nortel says its highest
capacity MPE platform, the MPE 9500, will be ready to ship in early 4Q and is
already in the lab at Equant. In addition, Telus and Infonet have reportedly
signed on to trial the product. In a 1/3 rack high chassis, the 9500 will
initially pack 40Gbps of full duplex switching capacity with an upgrade path
to 80Gbps. Smaller versions of the product are planned for early 2005. The
9500's can support twelve 10Gbps cards or twenty-four 2.5Gbps cards each as
well as up to twelve control-plane cards or up to eight data-services cards.
Some key features are not scheduled to be released until next year, however,
such as 10Gbps line cards, B-RAS support, and Layer 2 interworking. Alcatel,
Juniper and Laurel all support 10G interfaces today and Laurel also
incorporates B-RAS today in its platform. However, bottom line we view the
announcement today as a positive for Nortel and despite the staged release of
the product, believe the company should be able to leverage its leading
position in Layer 2 infrastructure into eventual strong sales of the MPE
9000. |
