Cisco's Accord With Ciena Pits It Against Lucent, Other Rivals
San Jose, California, April 23 (Bloomberg) -- Cisco Systems
Inc.'s decision to make its equipment compatible with Ciena Corp.
products is just the start of Cisco's push into markets also
targeted by Lucent Technologies Inc. and other rivals.
Cisco said this week it will begin shipping a product that
will link its most powerful routers directly to Ciena's dense
wavelength division multiplexers, or WDMs. Phone companies and
Internet service providers use WDMs, which split beams of light
carried on fiber-optic cable, to expand network capacity without
buying new fiber.
The No. 1 maker of computer-networking equipment is looking
to the telecommunications-carrier market to maintain revenue
growth as sales to its traditional corporate customers slow. That
will pit Cisco against big telecom-equipment makers like Lucent
and Northern Telecom Ltd., who also want a piece of the growing
market for gear sold to phone companies and Internet services.
''They are now viewing Lucent and Nortel as competitors,''
said Lee Doyle, an analyst at International Data Corp. in
Framingham, Massachusetts.
Speeding Traffic
San Jose, California-based Cisco sells its largest routers
to phone companies and Internet service providers, which use them
to route data between different parts of their networks. To speed
the flow of Internet-based data traffic, Cisco wants to link the
routers directly to WDM equipment and bypass other parts of the
network used primarily for voice calls.
''We're trying to remove layers from carrier networks,''
said Graeme Fraser, vice president of Cisco's Internet service
provider business unit.
Cisco's partnership with Ciena is a clear move against
Lucent, Ciena's chief rival in the WDM equipment market. Since
WDM technology isn't yet standardized, telecom service providers
can't use competing products in the same part of their network.
That will force phone companies and Internet service providers to
choose either Lucent or the Cisco-Ciena partnership to handle
growing Internet traffic with WDM gear.
Part of Cisco's strategy is to target the market for
products that link optical-based voice networks to corporate
computer-data networks and the Internet, Fraser said. Its
agreement with Linthicum, Maryland-based Ciena calls for the two
companies to develop products designed for networks that carry
primarily data traffic.
Those products are likely to be more attractive to newer
telecom service providers such as Qwest Communications
International Inc., which carries more data than voice traffic,
than they are to traditional long-distance phone companies like
MCI Communications Corp. and Sprint Corp., Doyle said.
While the amount of voice traffic has been relatively
unchanged this decade, data traffic has more than doubled every
year and both types of traffic frequently are carried on the same
network.
Different Levels
As Internet-based data traffic grows, telecom service
providers want equipment that lets them offer different levels of
Internet access. That will let them charge more to business
customers and squeeze more profit out of their Internet service.
The market for data-networking equipment sold to telecom
carriers is expected to increase to $18 billion in 2001 from
$5 billion in 1997, Doyle said. That doesn't include sales of WDM
gear and other optical-based telecommunications equipment made by
Lucent, Northern Telecom, Ciena and others.
''This is where the networking (revenue) growth is going to
come from'' in the next few years, said Craig Johnson, an analyst
at PITA Group in Portland, Oregon.
The Ciena partnership isn't Cisco's first move into optical-
based networking. The company in July bought Canada-based
Skystone Systems Corp., whose technology moves Internet-based
traffic over optical networks.
Cisco is developing other in-house optical networking
products and hasn't ruled out acquiring other small companies as
it prepares to battle Lucent, Fraser said.
''It doesn't make sense for us to do everything home-
grown,'' he said. Cisco has investments in several small optical-
networking companies, which Fraser declined to name.
If djane wants to swipe this story (or any other) for the ASND
thread, permission granted!<g>
o~~~ O |
