Cisco eyes push into fiber-optic market
Data giant Cisco Systems has got its eye on high-speed fiber-optic networking technology that will play a significant role in the construction of future networks.
Cisco's role in the boom for bandwidth is at stake. Increasingly, incumbent communications carriers, nascent telcos, and regional network operators are upgrading their existing networks to handle a variety of high-speed voice, video, and data transmissions.
Cisco's competitors, such as Nortel Networks and Lucent Technologies, are better positioned in the fiber-optic equipment market, given their traditional telecom heritage. Ciena has also carved out a niche as a high-capacity network provider. Some networking start-ups as well are working on various ways to tie optical links to their Internet equipment.
As a result, Cisco has made investments and acquired companies to expand its offerings. The deals have also helped the firm gain a greater understanding of what it takes to deliver high-capacity fiber-optic technologies to cross-country carriers as well as metropolitan areas--an emerging opportunity for various regional and national network operators.
Yesterday's $435 million acquisition of StratumOne Communications is intended to shore up the company's fiber-optic expertise in high-end routing, a now contentious niche that Cisco once dominated. StratumOne's semiconductor development will be integrated into Cisco's 12000 routing series, according to executives.
"We really see a need for high-performance networks built around IP [Internet protocol]," said Ammar Hanafi, director business development for Cisco. "This technology will permeate all of our high-end routing platforms.
"You will see a whole range of initiatives from us," he said.
The new chip technology could also be integrated for a rumored update to the 12000 series, reportedly to be called the "12000 Plus."
A recent study from technology consultants Forrester Research found that of 20 service providers interviewed, nearly 60 percent said the current state of network equipment is the primary reason why they have not implemented more fiber-optic technology.
The use of fiber-optics is not expected to remain a technology niche in long-haul networks, either. For this reason, Cisco has made equity investments recently in four start-ups focused on various corners of the optical market. Monterey Networks, Optical Networks, Corvis, and Cerent are some of the firms Cisco has taken an interest in.
"Our customers almost expect this from us--always increasing our competence," said Tony Bates, director of marketing for Cisco's optical internetworking business unit.
Cisco says fiber-optic technology will increasingly become a part of the data switches and routers the company sells. The push for the new technology should, in turn, drive an emerging interest in bandwidth as a commodity. According to a recent report from investment bank J.P. Securities, carriers will be able to buy and sell capacity on networks as needed.
Analysts expect Cisco to continue to spend to bolster its position in the fiber-optic networking market. Talk surfaced last fall that Cisco would make a play for networking firm Ciena. These rumors could re-surface as more and more carriers shift their fiber-optic strategies into high gear.