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Ribbon's Optical Network to Revamp German Rail Connectivity

Zacks Equity Research
·4 mins read

Ribbon Communications Inc. RBBN recently announced that its subsidiary, ECI Telecom, has collaborated with one of the leading communications services providers of Germany — DB Systel GmbH — to deploy an avant-garde chain of optical network across the country. The flexible optical networking system will, apparently, enable the firm to deliver transmission capacities to several service providers and assist German railway company — Deutsche Bahn AG — to address the proliferating bandwidth requirements for a streamlined communications infrastructure.

Headquartered in Frankfurt, DB Systel is a leading information and communications technology service provider that assumes end-to-end responsibility for technical support with utmost efficiency. The company provides best-in-class integration services, data solutions and digital consulting services to enhance customer experience. Interestingly, DB Systel is the digital partner of Deutsche Bahn. The IT organization is responsible for developing interactive timetable compilation and passenger information systems to ensure a seamless travel chain. Impressively, it operates a data network of nearly 340,000 IP ports, including broadband fiber optics.

As part of Deutsche Bahn’s "broaDBand project” collaboration, DB Systel will capitalize on Ribbon’s wide portfolio of innovative technology solutions. The portfolio, dubbed Apollo, consists of switching and optical transport network (OTN) products that provide high-density and energy-efficient solutions to various key sectors like transportation providers, utilities, defense and education. The access to core optical networking solution simplifies day-to-day operations and minimizes operational costs to improve the overall efficiency of optical networks. Its expandable switching solutions allow flexible OTN deployments to address the challenging requirements of long-haul networks.

Further, the communications service provider deployed a 100G Dense Wave Division Multiplexing high-performance optical transport network to revamp the logistics and operational activities of Deutsche Bahn. With this latest deployment, the railway company will have access to this top-notch low-latency network across 100 locations based in Germany. Apart from catering to the bandwidth demands, the innovative network of Ribbon’s ECI will enable Deutsche Bahn to strengthen its digital networking infrastructure while improving its business ties with external partners.

Notably, early this year, Ribbon announced the completion of merger with ECI Telecom. In addition to enhancing its solutions portfolio into adjacent markets, the deal facilitated Ribbon’s strategy of expanding into the 5G data domain with bundled network analytics, intelligence and security offerings. It allowed Ribbon to broaden existing customer offerings with ECI’s industry-leading packet optical transport solutions. Consequently, the integration aids Ribbon to increase its scale, total addressable market and global footprint in service provider networks, enterprises and critical infrastructure companies. Moving forward, the company intends to expand its relationships with fixed and mobile service providers, while capitalizing on high-growth 5G market for positive cash flow.

The stock is currently trading with a forward P/E of 14.2X. Shares of Ribbon have plunged 20.7% compared with the industry’s decline of 4.2% in the past year.

Zacks Rank & Stocks to Consider

Ribbon currently has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader industry are A10 Networks, Inc. ATEN, ADTRAN, Inc. ADTN and Calix, Inc. CALX, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A10 Networks pulled off a trailing four-quarter positive earnings surprise of 38.8%, on average

ADTRAN delivered a trailing four-quarter positive earnings surprise of 50.2%, on average.

Calix delivered a trailing four-quarter positive earnings surprise of 59.7%, on average.

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