JANUARY 3, 2008 -- In an industry note issued today, Morgan Keegan (search for Morgan Keegan) analysts suggest that Fujitsu has won Verizon's packet optical transport platform (P-OTP*) RFP and will serve as second source supplier for Verizon's next-generation core optical transport equipment based on reconfigurable optical add/drop multiplexing (search for ROADM) technology, beating both Alcatel-Lucent and Nortel for the business.
Morgan Keegan analysts believe the project could be worth $500 million or more over the next several years. Verizon's P-OTP RFP called for equipment integrating Ethernet, ROADM, and SONET transport technologies on a single network element. "While the win does not come as a complete surprise," reads the Industry Note, "we think the news bodes poorly for Alcatel-Lucent, and Verizon's current ROADM supplier Tellabs.
According to Morgan Keegan, Alcatel-Lucent likely bid the former Alcatel 1850 (Transport Service Switch or TSS) platform, a next-generation optical switch, coupled with ROADM features from the former Lucent's Universal Packet Mux or UPM that was announced at Globalcomm 2006 yet was scrapped post-merger.
"While the loss may not be viewed as material to sales anytime soon, with Alcatel-Lucent holding a commanding lead with 23% global market share in Q3:07 in optical gear according to Ovum-RHK, we think Alcatel-Lucent is losing ground at the former Lucent's top customer Verizon," contends the Note. Morgan Keegan analysts wonder if the news may also signal further declines in the former Lucent's optical business in the U.S. as carriers opt for alternatives to the merged vendor's offerings based on products from the former Alcatel.
Morgan Keegan believes that Tellabs, which won Verizon's original ROADM contract in 2005, will continue as Verizon's primary supplier of ROADM gear and likely continues to benefit as the new P-OTP equipment from Fujitsu undergoes integration, testing, and first office applications before commercial deployment in the second half of this year.
Contrary to some speculation, Tellabs is not being replaced by Fujitsu, say analysts, but Verizon will now have a second source and Tellabs must continue to invest in its 7100 platform to develop P-OPT features. Morgan Keegan does not believe Verizon has determined a share split between Tellabs and Fujitsu.
Though some investors believed Ciena was in the running for this business, Morgan Keegan says its checks suggested that the vendor was not invited to respond, citing Ciena's lack of a ROADM-based product.
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* Editor's note: Lightwave typically refers to the packet optical transport platform (P-OTP) as a packet optical network platform or PONP (search for PONP).