Summary
1. AT&T has plans to replace all of the Tellabs 5500s in the old BellSouth territory with Ciena’s CoreDirectors. 2. Near-term shipments of these cross-connects for this footprint could decline due to CAPEX reductions. 3. Tellabs should get some minimal benefit from the change.
Analysis
With AT&T under current financial pressures, the RBOC is looking to put off purchases on anything that is not critical to its wireline network. In deploying Ciena’s optical cross-connects, it can increase transmission efficiencies and reduce operational expenses. However, the level of pain has not reached a point in which it has to deploy as large a number of systems as initially scheduled. The Tellabs 5500s are working fine. So, AT&T could possibly get away in the short term with as low as 25% to 30% of the original budgeted expenditures. There is little doubt that Ciena will eventually ship a much higher number of CoreDirectors for the ex-BellSouth region.
In retaining the bulk of its installed base of 5500s in this case, Tellabs will be able to get slightly more revenue. New and replacement cards and other upgrades will be required.
