Sycamore allies with Siemens; focuses on optical switching and lays off 35% of staff

20 June 2002 -- An alliance has been established in which Siemens Information and Communications Networks will resell and support directly the SN 16000 intelligent optical core switching system of Sycamore Networks and integrate it with its TransXpress Infinity MTS long-haul systems.

20 June 2002 -- A non-exclusive strategic alliance has been established in which Siemens Information and Communications Networks (IC Networks) will resell and support directly (from more than 160 locations around the world) the SN 16000 intelligent optical core switching system of Sycamore Networks Inc of Chelmsford, MA, USA. Siemens will also integrate the SN 16000 with its TransXpress Infinity MTS long-haul transmission, SDH systems and network management systems.

The alliance enables Siemens to broaden its suite of NextGen optical networking solutions, said Thorsten Heins, president Optical Networks.

Sycamore says the SN 16000 - a 512-port OC48 switch with STS1 grooming capabilities which started shipping recently - reduces capital and operational costs in traditional optical networks and provides a scalable foundation for future growth and new service delivery, including "the industry's widest range of integrated optical transport interfaces" and "the only intelligent optical switches to support integrated ultra-long-haul optics".

Its switching technology and Siemens' long-haul transmission and SDH system portfolio will deliver an optical network solution fully integrated from the edge to the core of the network, it says. The software intelligence in all Sycamore products enables rapid deployment and delivery of services.

"This strategic alliance provides us with a significant opportunity to expand our footprint and reach additional global service providers," said Sycamore president and CEO Daniel Smith. "The best strategy for Sycamore is to partner, rather than compete, with incumbent transport suppliers".

Following Siemens' sale of Unisphere Networks unit to Juniper Networks in May, there was speculation that both Siemens and Alcatel were interested in buying Sycamore. However, with USD1bn in the bank, Sycamore can outlast the downturn and was in no rush to sell.

Instead, Sycamore says it plans to focus its business on the intelligent optical switching market with its SN 3000 and SN 16000 product lines and halt the development of its stand-alone metro and long-haul transport systems, including the SN 8000 and the SN 10000.

It will "leverage its expertise in transport technology to develop advanced optical switching platforms with integrated transport functionality", increasing R&D spending in optical switching by about 20% a quarter.

However, Sycamore will consolidate its engineering organisation and restructure - at a charge of USD45-55m in fiscal Q4/2002 (to end-July), including USD9-10m to cut about 235 (35%) of its 665 staff - to save USD15-18m quarterly by fiscal Q1/2003.
For Q3 Sycamore reported a net loss of USD22.8m on sales down 75% to USD13.6m. For Q4 it expects a loss of USD19.5-26.0m on sales of USD5-10m.

"By concentrating Sycamore's business plan on a growing market segment in which we have proven technological differentiation, Sycamore moves forward as a more focused optical switching competitor," said Smith. "These strategic initiatives will allow Sycamore to preserve cash and better align the cost structure with current market opportunities."

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