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Cisco unveils its new NCS converged networking fabric for "Internet of Everything"

FBR's Scott Thompson wrote:

The platform, which comes in three different sizes (6000-core, 4000-aggregation, 2000-edge), dramatically simplifies
high-end networking for service providers. It is a family of converged optical routers that provides a glimpse into Cisco's strategy for the network transformation as it blurs the lines between optics, switching, and routing. Cisco's acknowledgment that network architectures are undergoing significant change is an important shift in tone from a year ago, when Cisco's marketing message seemed to question whether the transformation was necessary or even taking place. Cisco seems to position the NCS platform as an overlay fabric that "glues" the existing network infrastructure together. We see the NCS launch as Cisco's acknowledgment that a multi-product, legacy network design will not work going forward, but we question if the focus on an additional piece of hardware is a step in the right direction. We expect carriers could, over several years, use it to simplify and displace many traditional functions of edge, aggregation, and core of the network. Meanwhile, we continue to believe carriers are likely to spend significantly less with vendors like Cisco as early as calendar 4Q13. 

    * Cisco has the right intentions, but will carriers adopt the strategy? The NCS solution seems to be hardware intensive and contingent on sizable capital investment. This runs counter to our checks that indicate capex trends at telcos in 2H13 and FY14 will not be as strong as they were in 1H13. Recall that AT&T's CEO Randall Stephenson recently confirmed that AT&T is driving change, which is resulting in cost savings of nearly 70% versus NCS's targeted TCO savings of 45%. We believe other SPs will follow suit and start changing buying patterns over the next six to 18 months as they migrate from current proprietary hardware systems to "bare metal" commoditized hardware.

    * Could NCS affect Cisco's existing product portfolio? We see Cisco's NCS platform as a near-term catalyst to help offset slumping routing and switching growth and market share. However, we need to take some time to analyze the impact of collapsing the routing, switching, and optical layers into a single platform. At first pass, allowing operators to aggregate layers and simplify the network design could diminish demand for stand-alone routers, switches, and optical transport in total. We also remain concerned about the pricing models associated with the platform. Industry analysts have indicated Cisco has been less than transparent with pricing detail, which is not a positive sign.

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Press Release: Cisco Delivers Network Convergence System to Power "Internet of Everything"

http://newsroom.cisco.com/release/1268183/Cisco-Delivers-Network-Convergence-System-to-Power-Internet-of-Everything?utm_medium=rss

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Other views:

Cisco this week introduced the Network Convergence System (NCS), a network fabric family designed to help service providers handle rapidly growing volumes of Internet traffic in cloud, mobile, video and machine-to-machine applications. A key focus for NCS is the “Internet of Everything” -  the trillions of programmable device-driven events generated by networked devices and sensors.

NCS is a solution combining hardware, software and silicon, featuring the recently announced nPower X1 integrated network processor. It is designed to help service providers build services and capabilities to build business from the explosion of data being generated by new devices being used to monitor our world. Cisco cites data from Machina Research projecting market opportunities of $174 billion  in health care, $284 billion in manufacturing and $850 billion in smart homes.

http://www.datacenterknowledge.com/archives/2013/09/25/cisco-builds-fabric-foundation-for-internet-of-everything/

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Addendum from FBR's Scott Thompson:

In an article published today on Barron's Tech Trader Daily, Cisco's CEO John Chambers took a giant leap forward in reestablishing the networking vendor's credibility. After months of Cisco's marketing machine denying that white box and cloud services are a threat, Chambers set the record straight.

According to the publication, "when asked what Cisco's biggest competitive threat is, Chambers mentioned that at or near the top of the list is service providers who just buy cheap 'white box' routers and switches." We applaud CEO Chambers for his candidness and believe it sets Cisco on a solid foundation to begin to publicly address (and correct) one of several significant threats the business faces. While it is encouraging to see that CEO Chambers may be focused on the right risks, it also makes us question why Cisco's marketing message has been misaligned with how executive management truly perceives the business environment.

CEO Chambers also stated that Cisco may compete against the likes of Amazon, which could offer IT as a service (IaaS) on a much cheaper network infrastructure and at a fraction of the price, by training its sales force to sell against it. We are skeptical of this strategy and do not believe that the solution will be that simple.

While we view today's announcement as the second positive step forward in as many days, we look forward to seeing Cisco come out with good solutions for its very real threats before we become more comfortable with the direction that the company seems to be heading. 

AT&T CEO: We're Open to European Acquisitions

AT&T CEO Randall Stephenson today affirmed his company's interest in investing in Europe at "good value," saying the regulatory environment precluded the company from making significant deals in the U.S. "We have pretty much written off that any kind of large-scale deal in our sector is going to get done," he told an investor conference. Stephenson's remarks came on the heels of Vodafone Group's sale of its Verizon Wireless asset, a move that could open up the European market for AT&T. Stephenson touted the company's stable balance sheet and Verizon Communications' "eye-opening" ability to sell $49 billion in bonds earlier this month

 

AT&T sees room to move the European market in the direction of the U.S. by investing in networks, shifting pricing strategies to encourage mobile data use and collecting more revenue as use increases. At the same time, heavy competition, declining revenue and the regulatory environment pose risks.

The European mobile industry feels consolidation is overdue. While AT&T remains interested, Mr. Stephenson said Tuesday that public-policy issues, especially in standardizing spectrum regulation, are holding the region back. Unlike the U.S., where spectrum licenses have an indefinite life, Mr. Stephenson said licenses in Europe might have a 10- to 12-year time span.  "It slows things down," he said. "You think differently about investing in that spectrum."

 

 

 

http://online.wsj.com/article/SB10001424052702303983904579094970829684140.html

Telecom Council TC3 Wireless Session Quicktakes & Highlights: Sept 18-19, 2013 at Juniper Networks in Sunnyvale,CA

At the Telecom Council's annual TC3 Summit this week, almost every cellular carrier talked about the importance of micro/nano cells to improve capacity to cope with exponentially increasing mobile data traffic.  Surprisingly, none talked about macrocells or LTE Advanced (ITU-R compliant "4G" RAN technology that many thought would start getting deployed next year).
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At the opening TC3 session: "Investor Forum meeting," the Nokia Ventures representative stated that "the mobile industry is heavily disrupted and (as a result) there will be many new opportunities in the next few years."  Among the strategic areas Nikia is interested in are: security, cloud, mobile, data centers, and video.
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During it's "Fireside Chat" session with Edgewater, BT said it had acquired licensed spectrum and was looking for innovations from vendors in femtocells, Self Organizing Networks (SONs), and "open models."  That strongly implies that BT is preparing to re-enter the mobile network provider market- either on its own or by sharing spectrum with O2 (owned by Telefonica).  This April, the Financial Times reported: "The UK telecoms group has begun a tender for an operator to provide BT mobile services to its customers, both in the consumer and business markets, as well as supplying its own staff. Auction experts said BT had been unexpectedly aggressive in bidding for spectrum, ending up with more than it needed for simply boosting its widespread WiFi networks."
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China Mobile's large TD-LTE deployment was described.  As the biggest mobile operator with 740 million subscribers, China Mobile is rolling out the largest LTE network with 200,000 base stations throughout 100 cities in China this year. China's largest mobile carrier uses equipment from 9 wireless network infrastructure vendors, including Huawei, ZTE and 3 smaller Chinese companies.  They claim to be the world leader in TD-LTE deployments.
China Mobile is looking for innovations in various fields to address the above challenges: Cloud-RAN, ET and GaN power amplifier, low cost WDM transmission solution, mmWave Front haul, small cell, TDD/FDD integration, VoLTE, SON, massive MIMO etc. 
Caroline Gabriel (Rethink-Maravedis) wrote:  "

 In fact, the world’s largest cellco has gone its usual route of breaking its contract into a large number of chunks and including just about all the contenders in the mix – nine equipment suppliers have been selected.

This approach can be complex to manage, in terms of a harmonized network deployment across China’s scattered and diverse regions. However, it gives Mobile access to the innovations and brainpower of as many companies as possible, which it regards as critical as it builds the world’s largest platform for TD-LTE.

The operator has been determined not to be left in a technology backwater as it was with its TD-SCDMA 3G network, and has been putting its considerable weight behind getting every infrastructure and device maker to support a TD-LTE ecosystem. It is also working closely with other holders of unpaired spectrum round the world to encourage build-outs and roaming deals, and so drive economies of scale.

China Mobile has already been working with a number of vendors on its trial TD-LTE build-outs, which are larger and more service-rich than many fully commercial deployments in other countries. However, it will only be able to turn on full commercial services once it receives its 4G licence, expected late this year or early 2014. Therefore this new round of contracts is the largest so far, with a total value of CNY20bn ($3.27bn), though it certainly will not be the last chance for suppliers to get a piece of the huge network.

Together, the companies will build a network covering 31 provinces with 207,000 TD-LTE base stations. The roll-out will be closely watched round the world, especially by other TDD operators such as Sprint/Clearwire in the US, Sprint’s majority owner Softbank of Japan, and Bharti Airtel and Reliance Infotel in India. However, there will be lessons for the wider LTE community too, since Mobile is increasingly taking on the role familiar among Japanese and Korean carriers – experimenting with new architectures, and driving suppliers' R&D programs accordingly, a process which can inject significant funds into next generation architectures, and also goes a long way to defining '4G+' platforms for the whole world.

For instance, China Mobile has been running extensive trials of Cloud-RAN architectures, and wants to scale these up dramatically to support 100 or more cell sites in the macro layer, with all their baseband processing virtualized in the cloud. This approach to network design is likely to become increasingly mainstream, and many of the rules will be established by this Chinese deployment. Here Alcatel-Lucent will be particularly important (along with other C-RAN partners like Intel and ZTE). ALU may have received only about 11% of the deal, reportedly, but it has worked closely with Mobile on a TDD version of its lightRadio design, which will be key to C-RAN and HetNet deployments.

The cellco also aims to be a leader in small cells (it calls its own version of this technology the ‘nanocell’), both for LTE and Wi-Fi (where it already accesses a network of perhaps two million hotspots). Therefore it will move quickly to a full HetNet, in which the various layers of cells, in different bands, will interwork fully to create a seamless pool of capacity. It has the advantage of a relatively clean slate, a huge budget and a vast resource of sites with fiber backhaul. Few will be able to emulate that elsewhere, but they will certainly be able to study the possibilities of the new architectures when deployed at scale."

http://www.maravedis-bwa.com/templateemail/newsletters/092413/china-mobile-shops-widely-to-expand-its-td-lte-ecosystem.html

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Software for mobile health was a theme that came up frequently at TC3 sessions with wireless telcos. Sprint expressed a strong interest in this area, and in the data that mobile health apps can generate. When asked about how it hopes to monetize this data Sprint said that strategy is still evolving.  Note that Sprint is a leader in M2M communications and that IEEE ComSocSCV has visited their M2M Collaboration Center in Burlingame, CA three times over the last few years.
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There were very few wireless technology start-ups presenting during the Investor Forum and SPIF sessions.  Here are brief summaries:
Ethertronics: 
RF front end using "active antenna system" that is able to dynamically respond to continuously changing wireless environment.  Interaction between antenna system and wireless modem along with end to end performance optimization was said to provide for a better user experience.
StreetLight Data:
Contextualizes anonymous location data (from cellular towers and GPS devices) to measure consumer mobility patterns for a place.  "This next generation geospatial data can help brick and mortar retailers, and planners, transform the way they make decisions."
Wefi Inc:
Key innovator in mobile data collection and analytics.  Customers include Cricket Wireless, TW Cable.  SDK for mobile apps comes pre-loaded on devices sold by carrier partners.  End users don't pay for this capability.
Radio Gigabit
(Russia):  MM Wave wireless backhaul with beam steering capability. Advanced radio technology for next generation mobile networks includes smart lens antennas beamforming and DSP.  "Will be the next big thing in small cell backhaul." 
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Steven Augustino of Kelley Drye & Warren law firm presented a keynote talk on the new FCC's Chairman's Spectrum Policy. 
-The number 1 goal of new FCC Chair Tom Wheeler will be to make more spectrum available for commercial use.  This will be accomplished by a "broadcast incentive auction" where TV broadcasters will voluntarily relinguish their wireless licences and auction them for use by mobile broadband service providers.
-Second goal:  Make broadband Internet access more pervasive throughout the U.S., especially in unserved and underserved (rural) areas.  A related goal is for 99% of schools to get 1G bit/sec access as part of the broadband for e-rate initiative.  http://www.fcc.gov/e-rate-update
-Third goal:  Improve public safety networks and the reliability of the nation's 911 emergency phone service.
More details on Mr. Augustino's talk in a follow up article.
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SPIFFY AWARD WINNERS:
The final TC3 day one event was the SPIFFY awards- the Council's annual innovation recognition ceremony where SPIFFY members recognize entreprenneurs helping to improve the telecom industry. 

2013 SPIFFY Award Nominees were selected by the 25 members of the Telecom Council’s Service Provider Forum (SPIF) from among over 100 early-stage representing the broad a range of telecom products and services who presented in Telecom Council meetings from June 2012 to May 2013.  But only seven start-ups were selected for awards.

The winners of the 2013 SPIFFY Awards are:  

•The Edison Award for Most Innovative Start-Up goes to SIGFOX.
•The Ground Breaker Award for Engineering Excellence goes to Jibe Mobile.
•The Graham Bell Award for Best Communication Solutions goes to Range Networks.
•The San Andreas Award for Most Disruptive Technology goes to SmartThings.
•The Core Award for Best Fixed Telecom Opportunity goes to 2600hz.
•The Zephyr Award for Best Mobile Opportunity goes to Quixey (mobile app search engine).
•The Prodigy Award for the Most Successful SPiF Alumni goes to Violin Memory.
•The Fred & Ginger Award for Most Supportive Carrier goes to Orange (located in SF) for the active role of their Silicon Valley-based team in supporting telecom entrepreneurs.
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President of Telecom Council, Liz Kerton said proudly of the 25 SPIF carriers and the 100+ startup presenters: “A great year for innovation in telecom; we all applaud these winners for their contributions to the future of our industry. The Telecom Council looks forward to presenting many more telecom companies to the industry in the coming years.”
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Related TC3 articles by this author: 
 

 

 
 
 
 
 

Macrocell Market Modestly Up in 2Q13 but DOWN 5% Year over Year; Telecom Council TC3 Tidbits

Infonetics Research released excerpts from its 2nd quarter 2013 (2Q13) 2G, 3G, 4G Mobile Infrastructure and Subscribers report, which tracks 2G, 3G, LTE, and WiMAX network equipment and subscribers.

2Q13 MACROCELL MOBILE INFRASTRUCTURE MARKET HIGHLIGHTS:
.    The global macrocell 2G/3G/4G mobile infrastructure market totaled $10.3 billion in 2Q13, up 4% sequentially driven by LTE ramp-ups in North America, Brazil, and EMEA
.    Yet, modest 2G and 3G activity kept the mobile infrastructure market down 5% on a year-over-year basis (2Q12 to 2Q13)
.    Projects at Bouygues Telecom, Etisalat, Everything Everywhere, MTS, Mobily, Vodafone D2, Claro, and Vivo propelled Huawei past long-time #2 NSN to move behind king of the macro 2G/3G/4G radio Ericsson
.    Estimated at $3.3 billion in 2Q13, LTE revenue grew 17% quarter-over-quarter, and 119% year-over-year
.    Europe joined the LTE bandwagon in 2Q13, and is now the 3rd strongest LTE market behind North America and Brazil
.    LTE rollouts began in earnest at Russia's MTS, MegaFon, and VimpelCom
.    Infonetics anticipates that 4G LTE subscribers could top 608 million by 2017

 

                                                  

MOBILE INFRASTRUCTURE REPORT SYNOPSIS:
Infonetics' quarterly 2G, 3G, 4G (LTE) report provides worldwide and regional market size, vendor market share, analysis, deployment trackers, forecasts through 2017 and trends for macrocell mobile network equipment and subscribers. The report tracks more than 50 subsegments of the market, including radio access networks (RAN), base transceiver stations (BTSs), mobile softswitching, packet core equipment and E-UTRAN macrocells. Vendors: Airspan, Alcatel-Lucent, Alvarion, Cisco, Datang Mobile, Ericsson, Fujitsu, Genband, HP, Huawei, NEC, NewNet, NSN, Proxim, Redline Communications, Samsung, UTStarcom, ZTE and others.

ANALYST NOTE:
"LTE continues to ramp up at a fast pace with a shift away from Japan and Korea to EMEA, Brazil, and Russia. And China is joining in a big way with two-thirds of total spending this year earmarked for LTE and expected by year's end. As a result, 2013 is shaping up to be a peak year for macrocell mobile deployments," notes Stéphane Téral, principal analyst for mobile infrastructure and carrier economics at Infonetics Research.

To buy the report, contact Infonetics: http://www.infonetics.com/contact.asp

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At the Telecom Council's annual TC3 Summit this week, almost every cellular carrier talked about the importance of micro/nano cells to improve capacity to cope with exponentially increasing mobile data traffic.  None talked about macrocells or LTE Advanced (ITU-R compliant "4G" RAN technology that many thought would start getting deployed next year).

More interesting at TC3 was that BT announced it had acquired licensed spectrum and was looking for innovations from vendors in femtocells, Self Organizing Networks (SONs), and "open models."  That strongly implies that BT is preparing to re-enter the mobile network provider market- either on its own or by sharing spectrum with O2 (owned by Telefonica).

This April, the Financial Times reported: "The UK telecoms group has begun a tender for an operator to provide BT mobile services to its customers, both in the consumer and business markets, as well as supplying its own staff. Auction experts said BT had been unexpectedly aggressive in bidding for spectrum, ending up with more than it needed for simply boosting its widespread WiFi networks."

http://www.ft.com/intl/cms/s/0/6f81a472-ace9-11e2-b27f-00144feabdc0.html?siteedition=uk

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Software for mobile health was a theme that came up frequently at TC3 sessions with wireless telcos. Sprint expressed a strong interest in this area, and in the data that mobile health apps can generate. When asked about how it hopes to monetize this data Sprint said that strategy is still evolving.  Note that Sprint is a leader in M2M communications and that IEEE ComSocSCV has visited their M2M Collaboration Center in Burlingame, CA three times over the last few years.

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China Mobile's large TD-LTE deployment was described.  As the biggest mobile operator with 740 million subscribers, China Mobile is rolling out the largest LTE network with 200,000 base stations throughout 100 cities in China this year. China's largest mobile carrier uses equipment from 9 wireless network infrastructure vendors, including Huawei, ZTE and 3 smaller Chinese companies.  They claim to be the world leader in TD-LTE deployments.

China Mobile is looking for innovations in various fields to address the above challenges: Cloud-RAN, ET and GaN power amplifier, low cost WDM transmission solution, mmWave Fronthaul, small cell, TDD/FDD integration, VoLTE, SON, massive MIMO etc.  More in follow up articles.

 



FBR Capital Markets:Layer 4-7 Players Regain Some Relevancy by Virtualizing SP Hardware

Posted on behalf of author Scott Thompson:

The march by service providers and large enterprises toward more open, bare-metal, and virtualized networks seems to be taking another unexpected detour, this one more positive for vendors focused on L4-7 special-purpose hardware. Recent carrier checks indicate a reluctance to aggressively shift from SP hardware platforms to bare-metal   hardware as much of the existing infrastructure has not been fully depreciated. The virtualization of existing special-purpose hardware improves the usable life of the hardware and the overall relevancy of the associated vendors. While it is unlikely that the virtualization of special-purpose hardware will drive new and significant deployments for L4-7 vendors, it should provide a near-term stream of high-margin software and feature-set and module upgrades, as well as slow the transition away from special-purpose hardware. We expect the combination could improve an otherwise troubled outlook for many of these vendors.

    * F5 improves virtual and special-purpose hardware by adding Versafe functionality to platform. F5 has recently announced several solutions that reflect a shift to this type of model. F5's acquisition of Traffix is likely to be a cornerstone of this strategy. Its recent marketing announcements around Virtual Clustered Multiprocessing and virtual edition solutions work to enable these solutions as well. We believe F5's acquisition of Versafe (announced Sept 17) is another example of how F5 is improving its relevancy in both the security and hybrid NFV markets.

    * Versafe Ltd., a Tel Aviv-based software company, provides Web anti-fraud, anti-phishing, and anti-malware solutions under its WebSafe and MobileSafe product lines. We expect F5 to deploy Versafe's solutions across the company's existing modules as enhanced feature sets; therefore, it is not likely to have an immediate material impact on operating results. We continue to expect that a shift to more software-based revenue could eventually make F5's revenue more steady and predictable.  However, we remain concerned about the earnings impact associated with transitioning from a transactional to a license-based revenue model.

    * Checks indicate special-purpose security vendors are gaining traction with hybrid models. We expect traditional firewall and security vendors are following a similar strategy to remain relevant to service provider, government, and enterprise accounts. Information generated from FBR's BIG "switches:" little SERVERS Conference last week led us to believe that some of the most respected names in security are working to virtualize their hardware platforms in an attempt to create hybrid cloud and NFV solutions. We expect this shift to be much more defensive than offensive, and do not expect the architecture to remain relevant through the mass deployment of rack-scale architectures, which       should begin to gain significant momentum in 2014.

Written by Scott Thompson, FBR

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Enterprise WiFi market grew 12% in in 2Q13; Service Provider Outdoor WiFi Deployments increasing

Infonetics Research released excerpts from its 2nd quarter (2Q13) Wireless LAN Equipment and WiFi Phones report, which tracks access points, WLAN controllers, and WiFi phones for the enterprise.

2Q13 WLAN MARKET HIGHLIGHTS
.    Globally, the enterprise wireless LAN equipment market recovered from a seasonally slow 1st quarter, growing 12% to $1.12 billion in 2Q13
.    Interactive access point revenue is up 21% in 2Q13 from the year-ago 2nd quarter (2Q12), reflecting the shift toward centrally-managed WLAN
.    Following years of languishing, outdoor access point shipments are back on a strong growth trajectory, up 22% year-over-year in 2Q13, propelled by service provider WiFi deployments
.    90% of access points sold in 2Q13 were based on the 802.11n standard
.    After showing resilience against negative macroeconomic trends in 2012, growth in EMEA (Europe, the Middle East, and Africa) is slowing in 2013
.    The perennial leaders in the WLAN space-Cisco and Aruba-both turned in solid performances in 2Q13, gaining revenue share

ANALYST NOTES
"The major event in the wireless LAN space this quarter was initial shipments of enterprise class 802.11ac access points, marking the beginning of another technology transition," notes Matthias Machowinski, directing analyst for enterprise networks and video at Infonetics Research.

"But the impact of 802.11ac will be minor in 2013, and with the transition to 802.11n almost complete, growth rates have been cut in half in 2013," Machowinski adds. "Global wireless LAN equipment revenue grew 14% year-over-year in the 2nd quarter of 2013, versus growing almost 30% year-over-year in the 2nd quarter of 2012. Still, WLAN remains the fastest growing network equipment segment."

 

 

WLAN REPORT SYNOPSIS
Infonetics' quarterly WLAN equipment and WiFi phones report provides worldwide and regional market size, vendor market share, forecasts through 2017 and analysis for WLAN infrastructure, including access points by type and technology, WLAN controllers, and enterprise single-mode WiFi phones. Vendors tracked: Alcatel-Lucent, Aruba, Brocade, Buffalo, Cisco, D-Link, Enterasys, Extreme, Juniper, Meru, Motorola, Netgear, HP, Ruckus, TP-Link, Ubiquiti, Xirrus, others.

To buy the report, contact Infonetics: http://www.infonetics.com/contact.asp

References:

WLAN BYOD WEBINAR
Join Matthias Machowinski of infonetics on September 25 for Architecting Wireless LANs for BYOD, a live event: http://w.on24.com/r.htm?e=668715&s=1&k=D5AFD17C2F2C3E8EEC3BDF97B2C77E32

History of WiFi -from WiFi Alliance

http://www.wi-fi.org/about/organization

Aberdeen Group: Measuring the Real Value of Wireless LAN Deployments 

http://www.wi-fi.org/knowledge-center/articles/aberdeen-group-measuring-real-value-wireless-lan-deployments 
 

Infonetics: Carrier WiFi market is red hot 

http://www.infonetics.com/pr/2013/2H12-Carrier-WiFi-Equipment-Market-Highlights.asp

Verizon working to buy out Vodafone stake in Verizon Wireless

Verizon Communications (VZ) is close to buying the remaining stake in Verizon Wireless (VZW) from Vodafone Group PLC it does not own for potentially $130 billion, according to people familiar with the talks, in what could be the third-biggest deal of all time.  VZW is the largest U.S. mobile carrier.  For months it has expressed its desire to gain full ownership of the jointly owned wireless network, which is growing fast and generating billions of dollars in free cash flow.
http://www.reuters.com/article/2013/08/29/us-vodafone-verizon-idUSBRE97S08C2013082

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“Verizon Wireless is the crown jewel,” says Chris King, an analyst at Stifel Nicolaus. “It has been the best performing of all telecom assets in the US.”  http://www.telegraph.co.uk/finance/9783344/Telecoms-giant-Verizon-is-conquering-America-the-world-should-take-note.html

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Verizon and AT&T already dominate the U.S. telco market.  They have effectively re-constructed the monopoly AT&T had before the divestiture of the Bell System. 

 

This chart, courtesy of the Wall Street Journal, shows the changing world order for U.S. telcos:

 

 

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FBR Research: Optical Upgrade Cycle Drives Demand for Ciena's products

FBR's Scott Thomspon:

"Ciena is arguably the world’s leader in optical communication innovation and is dependent on carrier spending on optical (think lasers) equipment. We expect Ciena’s revenue to be focused on two near-term themes that are likely to drive a strong revenue growth cycle in the optical equipment space. The near-term themes include a carrier optical network upgrade cycle and continued deployment of fiber-based Ethernet technologies for wireless backhaul.


Ciena appears to be two-plus quarters into an optical upgrade cycle that management has indicated could be longer than past cycles. While we expect Ciena will continue to post strong results on the back of    relatively strong service provider spending patterns, we encourage investors to keep expectations in check as revenue recognition is often lumpy for CIEN (30%-plus of revenues are from two customers)."

Key Points:
■ Converged packet networking, software, and services combine to deliver a more balanced and prolonged upgrade cycle. Past cycles have often been driven by optical transport and a mix of switching, resulting in significant volatility throughout the upgrade cycle. We view this cycle as being different given strong and balanced growth in multiple and higher-margin categories such as packet networking, software, and services balance Ciena's core product growth. For the July quarter, we expect growth in Ciena's packet networking segment is likely to remain robust, potentially delivering upside to our above consensus revenue and GM estimates.
■ Margins continue to improve? We expect GMs to remain strong for Ciena for several reasons: (1) several industry participants have made comments recently about pricing pressure abating as carriers continue to deploy significant optical network upgrades, (2) component cost savings associated with WaveLogic 3 could drive additional upside to Gross Margins (GM) through CY13, and (3) Ciena is beginning to work through the initial stages of deployment where lower-margin chassis mute GM expansion. While we are always cautious with regard to GM with Ciena, we expect the July quarter GM result could come in well above our and the consensus 42.6% estimate.
■ Raising July quarter revenue estimates; tempering our enthusiastic EPS slam dunk. We are raising our revenue estimates in expectation of strong 2H13 optical spending patterns. We have revised F3Q13 revenues above the high
end of management's guide to $549M from $534M, above Street consensus of $532M, and lowered our GM estimate to 43.4% from 44%. For FY13, we expect revenues to come in at $2.05B, up from $2.03B, against a Street consensus of
$2.04B. As a result, our $0.23 EPS estimate declines to $0.22 for F3Q13 but remains well above Street consensus of $0.15, while our FY13E EPS declines to $0.58 from $0.67 to make room for any potential non-linearity in large project
completions, which have been known to concern CIEN investors.

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Q &A:

1. Will service providers, especially in the U.S., invest in an optical network upgrade cycle in 2013?
Yes. Carriers seem to invest in optical products in cycles. We expect that Verizon Communications, Inc., AT&T Inc., and Sprint are planning to make material investments in the optical layers of their networks in 2013.
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2. Will Cisco s move to integrate optical transport into its routing platform pressure gross margins across the optical network equipment sector?
We believe Cisco only makes a concerted effort to enter a market when it believes it can hold one of the top two market share positions in the category. We expect Cisco s move to integrate optical capabilities into its routing platform creates a more credible and negative threat for Ciena and its ability to maintain and grow its gross margin profile.
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3. Could increasing competition from Huawei Technologies Ltd. and Infinera Corporation pressure the gross margin?
Yes, but we are cautiously optimistic that pricing pressure may have subsided a bit. Additionally, lower COGS associated with the WaveLogic 3 product could help to offset competitive margin pressures for the next several quarters. Huawei is an aggressive competitor, but we expect political pressure against Huawei in the U.S. and the EU may prove beneficial for Ciena s margins in 2013.
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References (by this author):

Ciena and Research Network Partners Work to Make Carrier WAN-SDN Realizable                  http://viodi.com/2013/08/12/ciena-research-network-partners-work-to-make-carrier-wan-sdn-realizable/

Open Network Foundation & Other Organizations; ONF-Optical Transport WG; Ciena & SDN http://viodi.com/2013/04/24/open-network-foundation-onf-optical-transport-wg-ciena-sdn/

Sprint to Scale Core Network to 40G/100G and later 400G with Ciena's 6500 Packet-Optical Platform  http://community.comsoc.org/blogs/michaelweiss/sprint-scale-core-network-40g100g-and-later-400g-cienas-6500-packet-optical-platf

Ciena brings SDN functionality to new network architecture- OPn http://community.comsoc.org/blogs/alanweissberger/ciena-brings-sdn-functionality-new-network-architecture-opn-july-comsocscv-mee

 

 

 

AT&T Opens new Innovation Center/Foundry in Atlanta, GA (#4)

A&T's latest Innovation Center/Foundry -- its fourth in total -- has opened in Atlanta, GA.  This new Atlanta Foundry will focus on projects around Digital Life (AT&Ts home security and automation service), as well as U-verse, mobility and “connected car.” The Atlanta facility has nearly 8,000 square-feet of work space, and AT&T plans to use it all.
The Atlanta Foundry location has an open floor plan, enabling collaborative teams to rapidly form and regroup.  Results from the work by AT&T and its partner companies will be used to progress and improve AT&T's U-verse and Digital Life platforms as well as new applications
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At the June 12, 2013 IEEE ComSocSCV meeting, AT&T presented their Silicon Valley Foundry as well as other topics.  
Jacob Saperstein described the mission and purpose of AT&T's Palo Alto Foundry, how it relates to AT&T's Innovation Platform, and its role in the Silicon Valley ecosystem.    In addition to its Palo Alto facility, AT&T has Foundry locations in Richardson, TX and Ra'anana, Israel (and now Atlanta, GA).  At these three "Innovation Centers," AT&T  teams up with start-ups and leading edge companies to fast-track new apps, devices, software/hardware platforms and other areas of technology innovation. 
The referenced IEEE ComSocSCV-AT&T meeting abstract, speaker names and presentations can be downloaded from http://comsocscv.org/  by clicking on June 12, 2013 meeting

 
 
 
 

 
 

SDN to be a $3.52 billion market by 2018; Cyan's Blue Orbit for carrier based SDN and NFV applications

The software-defined networking (SDN) will be a $3.52 billion global market by 2018, according to Transparency Market Research. The market research firm’s new "Software Defined Networking (SDN) Market - Global Industry Analysis, Size, Share, Growth, Trends, and Forecast, 2012 - 2018" report predicts SDN spending worldwide will grow at a compound annual growth rate of 61.5% from 2012 to 2018.

http://www.transparencymarketresearch.com/software-defined-networking-sdn-market.html

The increasing need for efficient infrastructure and mobility, as well as the popularity of cloud services, will drive this growth, according to the report.  Transparency Market Research cites three main markets for SDN: enterprises, cloud services providers, and telecommunications services providers. Enterprises represented 35% of the SDN market in 2012. However, cloud service providers are expected to be the fastest growing market segment throughout the years the report covers. Transparency Research says that SDN’s ability to reduce opex and capex while enabling the delivery of new services will spearhead its use by cloud service providers.

Cloud provisioning and orchestration products currently dominate the global SDN market, the report states. SDN switching held the second largest revenue share of the SDN market in 2012. SDN products and applications also will be used to design, optimize, secure, and monitor the network, the market research firm predicts.  The report segments the global SDN market into users, products (including SDN switching, SDN controllers, cloud provisioning and orchestration, and others such as security and services), and region.

North America currently is the largest market for SDN technology, thanks to a high degree of standardization and favorable regulatory initiatives. Not surprisingly, Asia Pacific is expected to be the fastest growing region during forecast period, fueled by the increasing adoption of BYOD practices in China, India, and Australia.

In this early stage, the SDN industry is fragmented, the report asserts. Multiple players have moved to address different categories including hardware providers, software developers, and service providers. Transparency Research names Cisco, IBM, NEC, Juniper Networks, Alcatel-Lucent, VMware, HP, Google, Big Switch Networks, Arista Networks, Brocade Communications Systems, Verizon Communications, and Intel among the primary players.

Comment:  We think that the term "SDN" includes both ONF standards based (e.g. Open Flow) and vendor specific (e.g. Arista Networks) open networking solutions.   We wonder how large the SDN standards based market wii be.

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Cyan Inc, a leading provider of software-defined networking (SDN) and packet-optical solutions for network operators, today announced that Pica8, Inc. has joined Blue Orbit, an ecosystem of partners focused on proving real-world, multi-vendor, software-defined network (SDN) and network functions virtualization (NFV) applications. 

“The addition of Pica8 to the Blue Orbit Ecosystem demonstrates the supplier community’s desire to come together and push interoperability testing and real deployments forward,” said Joe Cumello, chief marketing officer at Cyan. “As Blue Orbit continues to grow, we are gaining invaluable insight into how we can help network operators such as carriers, data center operators and cloud companies slash OpEx, launch new services, and deliver a better customer experience.”

In June 2013, Blue Orbit was formed to demonstrate interoperability among SDN and NFV solutions from an array of partners to lessen the risk network operators would otherwise face and accelerate the deployment of production SDN and NFV use cases. Blue Orbit partners provide applicable solution elements to Cyan’s California-based Blue Orbit Lab. From this facility, Cyan, Blue Orbit partners, and customers are able to test and demonstrate the deployability of SDN solutions.

http://www.cyaninc.com/en/keep-up/press-releases/2013/pica8-joins-cyan/