Cisco makes waves amid sector carnage

Stalwart Cisco Systems plans to announce a deal for up to $1 billion in optical and Internet gear with an emerging telecommunications company.

2 min read
After a tumultuous week for the networking industry, stalwart Cisco Systems plans Wednesday to announce a deal for up to $1 billion in optical and Internet equipment with an emerging telecommunications company.

The El Paso Global Networks telecommunications subsidiary of El Paso Corp., a natural-gas company, plans to use a variety of Cisco technologies to reach 34 metropolitan areas using a brand-new network. El Paso has said it will spend about $2 billion on the network, with up to $1 billion going toward equipment.

Cisco disclosed Tuesday the shipment of a new device that combines optical technology with the Internet. The new Optical Service Router 7600 is thought to be more versatile than Cisco's other recently announced high-end routing technology. It is based on an internally developed chip technology that is also found in Cisco's 10000-series routing devices.

360Networks is among the initial customers for the new optical router.

Competitor Nortel Networks warned last Thursday of a significant earnings and revenue shortfall for its current quarter and fiscal year, citing among other reasons the economic slowdown in the United States and altered spending patterns among its telecommunications customers. Cisco came up just short for its own recent quarter and said sales will be flat for the next two quarters.

A large deal could give Cisco a lift in this climate. Executives said the deal was born out of discussions that date back as far as a year and a half ago. Significantly, Cisco also will not finance any of El Paso's equipment purchases--a hot-button issue in the network equipment industry, as more and more network operators fall on hard times.

"We're not financing any of it," said Larry Lang, vice president of marketing for Cisco's service provider line of business.

El Paso, originally expected to announce the deal Tuesday, delayed the announcement until Wednesday.

El Paso plans to use Cisco's 12000 line of routing devices and the ONS-series optical systems from Cisco's acquisition of Cerent. Lang said it is likely the company's new OSR 7600-series technology could be part of the mix as well.

Several other energy companies are diving into communications, hoping to grab a chunk of the huge industry.