Ciena confirms ZTE partnership

Ciena has been in a quiet partnership with Chinese equipment vendor ZTE since September 2005, the company has confirmed.

ZTE sells Ciena’s CoreDirector CD and CI long-haul optical switches as its own ZXMP C660 and C640, respectively, in Asia.

In a written statement, Ciena called the ZTE partnership “part of [Ciena’s] overall partner approach to Asia.”

“There is limited joint development in progress to the extent required to address features/functionality specific to that region,” Ciena said.

Ciena and ZTE are collaborating to help build an optical network for Inner Mongolia Netcom, a subsidiary of China Netcom. That network was scheduled for completion in October 2006.

“We see this [partnership] as a means to grow sales in some emerging markets, albeit at a potentially lower margin, while also presenting a chance to reduce costs,” Morgan Keegan analyst Simon Leopold wrote in a research note today. “Ciena historically has not had strong direct channels into emerging markets, so the deal makes sense.”

Twenty-nine percent of the revenue in Ciena’s 2006 fiscal year came from international markets. That number increased in the second half of last year, from 23% in the third quarter to 31% in the fourth. And international revenue could become a bigger contributor this year, with help from Ciena customer British Telecom.

Ciena has also created a research-and-development facility in India to better serve the low cost requirements of emerging markets. In mid-2005, a few months before the company partnered with ZTE, Ciena chief executive office Gary Smith toldTelephony, “It is no longer enough to be successful in North America. Our positioning is around innovative technology deployed for economic gain. We are seeing more and more of that in Europe and Asia. We are investing our sales and marketing activity more outside of North America, as a result.”