The irony of it all

The making or quashing of deals has a profound effect on the path a company takes. For Ciena, fate stepped in when AT&T pulled out of its proposed trial of Ciena's long-haul equipment in 1998.

In an odd twist, AT&T last week proclaimed faith in Ciena's MultiWave Metro dense wave division multiplexing (DWDM) equipment by rolling it out in metropolitan markets. Although no dollar amount was given for the open-ended contract, some estimate the deal is worth about $40 million to $50 million during the next one to two years.

AT&T is providing competitive service in 71 U.S. metropolitan markets and plans to use the Ciena equipment to deliver up to 24 wavelengths of protected OC-48 or OC-192 per fiber, as it is doing already in the Los Angeles metro area.

Considering AT&T's pullback from the equipment trial in 1998 led to the demise of Ciena's proposed merger with Tellabs, the deal is truly unique. After Tellabs cancelled the merger, Ciena went into a tailspin and suffered through hard times on the path to recovery.

“It's a small world,” says Denny Bilter, senior director of marketing at Ciena. “But we never lost our focus on trying to get them as a customer even though that happened.”

The deal also marks Ciena's entry into all the Tier 1 IXCs, Bilter said. “This is going to be the start of a really good relationship,” he said.

But Ciena is not the only equipment AT&T will use; another vendor also has been selected.

“We always use a minimum of two primary vendors,” said a spokesman for AT&T. “We just haven't revealed publicly who the other one is yet.”

Likely candidates are Nortel Networks and ONI Systems (see figure). Other vendors such as Cisco Systems and Lucent Technologies recently released products, but they were probably too late to be considered, according to Shin Umeda, principal analyst at the Dell'Oro Group.

“This is really good news for Ciena because in the last couple of quarters their business has been declining in metro DWDM,” Umeda said, noting that such a slowdown can be caused by the way service providers build out in spurts.

Most agree the win was huge for Ciena.

“It's a premier account that Ciena thought they would get two years ago,” said Peter Sevcik, president of NetForecast.

And in the grand scheme of things, if Ciena were now a small part of Tellabs, it wouldn't be as powerful as it is today, Sevcik said.