Router, optical vendors set to butt heads over packet/optical convergence
Things are heating up in the core packet/optical space, the area targeted by Cisco with its recent acquisition of CoreOptics, a maker of optical modules and subsystems. Cisco bought the company to integrate 40/100G DWDM transponders directly onto its routers as opposed to connecting the routers to separate DWDM systems in the optical core of carrier networks.
This sets the stage for a standoff in the core between the router vendors and makers of optical transport systems. At stake is an increased total available market for these vendors by subsuming each others’ technology into their own – routers absorbing optics, optics absorbing routing – to achieve a converged packet/optical transport network.
Investment firm UBS recently issued a bulletin on the rising temperature in this market. UBS believes optical vendors like Ciena, Alcatel-Lucent and others will add packet capabilities to their optical transport systems “to attack the core router market” as these converged architectures evolve. Cisco’s purchase of CoreOptics indicates that core router vendors are counterattacking – UBS expects Juniper also acquire or closely partner with an optical module/subsystem company to embed 40/100G transponders on its core routers.
UBS also believes Juniper is developing a lower cost MPLS core router for the converged packet/optical opportunity.
These trends make it unlikely that either company will acquire a company like Ciena to grab a larger hold on the converged packet/optical market – or on optical in general. UBS finds it interesting that Cisco did not bid on Nortel’s Metro Ethernet Networks business when it was the block; Nortel was a leader in 40G DWDM. MEN was eventually snapped up by Ciena for $773 million.
CoreOptics was nabbed by Cisco for just under $100 million.
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