CSFB's Smith thinks there is little threat that Siemens will later develop its own product and ditch ADVA. "We had been concerned that Siemens would focus on its own internal development [to the exclusion of ADVA]," he says, "but today's announcement suggests Siemens wants to extend the OEM relationship."
In its quarterly financials released today (see ADVA Reports Contract, Q2 Results), ADVA painted the portrait of a firm that could use a shot in the arm, despite quarterly improvements in sales and gross margins. For its part, Siemens ICN has been struggling to restructure in the wake of the current market downturn (see Siemens Weighs Optisphere Options).
ADVA has approximately 500 customers today, nearly all of those are enterprise businesses. Siemens ICN, in contrast, does roughly 70 percent of its worldwide business with carriers like Deutsche Telekom AG (NYSE: DT). And it's seeking to mine the lucrative enterprise market in the metro space.
Nothing is guaranteed in the contract. For one thing, ADVA's deal with Siemens isn't exclusive in any way. What's more, competition in the metro market is fierce, and companies such as Ciena Corp. (Nasdaq: CIEN), Nortel Networks Corp. (NYSE/Toronto: NT), and ONI Systems Inc. (Nasdaq: ONIS) have momentum. They've also earmarked international markets as a key to survival.
- Mary Jander, Senior Editor, Light Reading
http://www.lightreading.com
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