Are Sales of Ciena’s World Wide Packet Solutions to AT&T In Jeopardy?

Implications: 1.      The understanding in the industry has been that Ciena bought World Wide Packets (WWP) at the bidding of AT&T. 2.      However, at this point, Alcatel-Lucent’s TiMetra seems to be building a case for the RBOC’s business.   3.      If Ciena winds up not getting a contract from AT&T for its WWP gear, it will likely hurt its revenue generation in 2009 substantially more than this year.

Analysis:  Despite the uncertainty of AT&T actually buying WWP equipment, overall sales for Ciena should come in as expected for the supplier’s current quarter (although higher costs could affect the bottom line).  But it is certainly not out of the question that the outlook in future quarters might have to be adjusted.  

Apparently, there was no quid pro quo in place between AT&T and Ciena regarding WWP.  Alcatel-Lucent is making a huge move to get the carrier’s business with its TiMetra solution – and right now, it is apparently competing very hard in that territory.   

It is still not out of the question that Ciena could still win part or all of the business in this space at AT&T.  In fact, in order to save face, the supplier might have to aggressively undercut its large rival on price.   Most importantly, the evident doubts reflect poorly on the leadership at Ciena – just at a time when it seemed that there had been signs of maturation at the top. 

If there was a misinterpretation of a wink-and-a-nod signal from the service provider, which is still actively buying CN 4200s and CoreDirectors from the manufacturer, it will be a reminder of the other questionable acquisitions that the company has made in the past.