Ciena aims to diversify with cable clients

Ciena has sold its CoreDirector optical switch to cable operator Cox Communications, part of the vendor’s effort to penetrate the cable space and thus diversify its customer base.

The first cable company to deploy the CoreDirector, Cox will use the optical switch to connect two metro rings in its San Diego superhead-end with multiple 10-Gb/s optical connections.

Reaching further into the cable market could help Ciena smooth out some of the lumpiness in its customer base and, in turn, some of the risk inherent in its business. In the vendor’s 2006 fiscal year, which ended in October 2006, 40% of its revenue came from just three customers: AT&T, Sprint and Verizon Communications.

“Ciena has grown its absolute number of customers and has grown sales in newer market verticals of cable TV and enterprise,” Morgan Keegan analyst Simon Leopold wrote earlier this month. “However, it continues to have [customer] concentration that we consider an investment risk.”

Leopold expects some of Ciena’s list of top customers to change this year, as some top customers spend less with Ciena. In particular, he imagines Ciena to have to increasingly share last year’s top customer, Sprint, with its other optical supplier, Infinera. And he expects Verizon to cut back as it consolidates suppliers following its absorption of MCI. But BT and Qwest, occasionally top Ciena customers in some quarters, should contribute more to the vendor’s top line this year, he said.

Today Ciena’s customer base includes seven of the top ten multiple systems operators in the cable space, including Adelphia, Armstrong, Buckeye Cable System, Cablevision and J-Com. Nine months ago, Ciena announced Cox had become the fourth cable company to deploy its CN 4200 multiservice transport and aggregation platform.