Seemingly Limited Margin Generation on Fujitsu’s ROADM Deal with Verizon

Implications: 1.      Verizon historically has always been relentless in obtaining as many price concessions from its suppliers as possible. 2.      Even key strategic vendors to the RBOC have not been immune to extremely tough negotiations on cost matters.   3.      It appears that Fujitsu is not making much money on the ROADMs it is selling to Verizon.  

Analysis:  Of course, with a shrinking number of big carriers in the market, Verizon’s bargaining power on cost with its suppliers is that much stronger. The RBOC will not hesitate to leverage a manufacturer’s products against another one of its solutions.  It seems likely that compromises agreed to by Fujitsu on its ROADM helped to facilitate the win at Verizon on the 9500.  

Potential areas of the contract that Fujitsu could have taken a substantial beating on price wise for its ROADM include training, shipping and warranty matters.  Altogether, little was left in terms of profit.  

Fujitsu is certainly not happy with the ROADM deal. However, it must hope that it will bring additional business beyond the 9500 in other market segments.