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Ciena (CIEN)-SK Telink to Revamp Transpacific Route Network

Zacks Equity Research

In a concerted effort to reinforce connectivity solutions, Ciena Corporation CIEN recently announced its collaboration with a telecommunications company — SK Telink. Reportedly, the telco will leverage Ciena’s much-acclaimed Adaptive IP platform to create a converged packet network that will deliver best-in-class cloud, Internet and IP-based services for a streamlined network infrastructure. The upgraded network will connect South Korea, Hong Kong, Seoul and Los Angeles with a revamped submarine network. The strategic move will enable Ciena to benefit from market share gains and augment its geographical footprint with an accretive customer growth in Asia.

SK Telink is a South Korea-based wireless services provider that has established itself as a major player in the international calling market. The international call services are offered under the brand — 00700. Owing to an aggressive marketing strategy and low-priced offering, 00700 has become the most popular international call service in Korea. Interestingly, the company is a subsidiary of SK Telecom Co.,Ltd SKM, which offers wireless voice and data transmission, IoT, broadband Internet access and cellular global roaming services. Per the collaboration, SK Telink will capitalize on Ciena’s 6500 Packet Transport System (PTS) that will enable it to support the delivery of Time Division Multiplexing (TDM) services.

Supported by a simplified approach, Ciena’s Adaptive IP solution eliminates the traditional manner of deploying and maintaining IP networks by minimizing the challenges associated with legacy network designs. The innovative platform optimizes wireless and wireline sides of network infrastructure with automation and analytics to allocate network resources with maximum performance and return. It enables network operators to deliver IP-based connectivity for legacy TDM, edge computing and 5G services with utmost agility and scalability. Meanwhile, the 6500 Packet Transport System, which is a part of the Adaptive IP platform, addresses the increasing demand of TDM services to scale connectivity to legacy services. Equipped with a packet-based architecture, PTS saves substantial office footprint, maintains avant-garde mission-critical private line services and reduces power consumption for better customer experience.

Apart from PTS, SK Telink will leverage Ciena’s Manage, Control and Plan (“MCP”) domain controllers for a modernized network infrastructure. Notably, MCP is a cloud-native platform which stimulates end-to-end operational workflows through SDN software control and automation. The industry-leading solution will enable the Korea-based telco to automate lifecycle operations of its packet network. Impressively, it eliminates the time-consuming process of planning and building network to realize the benefits of MCP faster. The platform accelerates time-to-market of revenue-generating services across Ciena’s infrastructure and drives troubleshooting with best-in-class monitoring capabilities. With these features, Ciena is likely to be a perfect choice for SK Telink for the establishment of first packet-based transport network in a transpacific route. This will strengthen the company’s global scale of operations and technology leadership.

Moving ahead, Ciena is confident about its business model and is likely to benefit from growing demand for packet-optical transport and switching products, integrated network as well as service management software. Further, it is investing in the data and optical fiber market to capitalize on the tremendous growth opportunities offered by bandwidth demand from network service providers, while augmenting its Packet Networking portfolio to capitalize on 5G. It is also focused on the expansion of its Web Scale IT Architecture in the enterprise market by launching products like chipsets, metro architecture and mobile backhaul solutions. Its strong product portfolio is expected to boost the top line in the long run.

Ciena has a long-term earnings growth expectation of 16%. The company has topped earnings estimates thrice in the last four quarters. It has a trailing four-quarter positive earnings surprise of 25.6%, on average. The stock has returned 26.6% compared with the industry’s growth of 26.2% in the past year.



Ciena currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the broader industry are ADTRAN, Inc. ADTN and United States Cellular Corporation USM, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

ADTRAN’s bottom line surpassed the Zacks Consensus Estimate thrice in the last four quarters. The company has a trailing four-quarter positive earnings surprise of 8.5%, on average.

United States Cellular’s bottom line surpassed the Zacks Consensus Estimate twice in the last four quarters. The company has a trailing four-quarter positive earnings surprise of 104.1%, on average.

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