The Promise of Nortel's 40G Technology

One of the key questions facing Nortel (NT) is where/if its next high-growth market will emerge.

A year ago, Nortel was bullish on Wi-Max but the recent joint venture with Alvarion (ALVR) made it abundantly clear that the Wi-Max market is not growing as quickly as Nortel would have liked. Hence, the decision to put its R&D dollars into LTE.

An area that may have some promise is 40GB optical technology as carriers looking to ways to carry applications such as high-definition video that chew up a lot of bandwidth.

In a recent research report, TD Securities analyst Chris Umiastowski said Nortel’s 40GB portfolio looks “very strong”:

Nortel has already won 14 customers with its differentiated 40 Gig optical transport product in only 6 weeks of general availability. We believe this product line could build up to hundreds of millions of dollars of revenue over the next 2-3 years, and perhaps more important, it should pull in at least an equivalent dollar amount of other Nortel optical products. Most impressive to us is Nortel’s win of a $30 million contract to deploy 40 Gig transport on a competitor’s undersea optical amplifier chain. This opens a huge door for Nortel in terms of attacking market share that is currently owned by competitors.

Earlier this week, Nortel announced a deal with Southern Cross Cable to upgrade its terrestrial optical network in the U.S. to 40GB from 10GB technology. The Southern Cross network provides the major link for Internet traffic from Australia, New Zealand, and Fiji to the U.S. and links Hawaii to the U.S. mainland.

Comments

[AmesTiedeman]

NT and ALVR are leaders. Both should do quite well in the next 5 years.