A Department of Defense contract is perking up the the bedraggled telecom equipment sector.
The Global Information Grid Bandwidth Expansion (GigBe) is said to be worth up to $900 million over two years and includes large orders for core and edge routers, multi-service provisioning platforms, optical transport systems; and optical digital crossconnects.
Winners have not been officially named, but an industry news site Light Reading, citing unnamed sources, said Ciena , Cisco
, Juniper
and Sycamore
will take major shares of the deal.
Others companies will benefit, either through subcontracts, or for smaller specialized parts of the project.
Neither the Pentagon, nor the companies, are commenting. Previously, the DoD said the deals would be announced by Oct. 1.
GigBe’s aim is to establish an optical network providing high-speed Internet protocol services to approximately 100 facilities in the United States, the Pacific and Europe.
News of the GigBe contract has grasped the attention of anlaysts and investors. At Deutsche Bank Securities (DB), experts expect Ciena will take the optical long-haul portion of the project, worth up to $150 million over two years.
As a result, DB has raised its revenue and earnings estimates for 2004 — from $302 million to $367 million, and a loss of 20 cents per share to a loss of 15 cents per share, respectively.
Even so, DB said it is taking a “wait and see” approach on Ciena, because of its “hazy profitability outlook and expensive valuation.”
Seeing Cisco’s name among the winners was not great surprise. Executives at the industry giant have been waxing optimistic in recent weeks about the slow but steady pickup in their business.
In addition to GigBe, Cisco has lately impressed SG Cowen analysts with its improving efficiency and growth in other market niches, including carriers and home networking (throuhg its Linksys unit).
The contract will be especially helpful to Sycamore, a maker of optical switching equipment that has been hard hit by the slowdown. The Massachusetts-based firm has seen its stock jump around 20 percent on rumors it would be a GigBe winner. If correct, the win would aid its case in bidding on other government contracts.
Conversely, Corvis saw its market value sink as it appeared to lose out on major contracts in the project.
