CHICAGO, Sept 12 (Reuters) - Shares of Sycamore Networks Inc. (SCMR,Trade) rose to a 2-1/2 year high on Friday on reports the telecommunications equipment maker may have won a portion of a government contract worth as much as $900 million over two years.
Analysts cited a report on networking Web site Light Reading (http://lightreading.com), which reported Sycamore, Cisco Systems Inc. (CSCO,Trade), Ciena Corp. (CIEN,Trade) and Juniper Networks Inc. (JNPR,Trade) won portions of a federal contract for equipment.
A spokesman for the Pentagon and the agency involved did not return repeated phone calls.
However, Juniper spokesman Kathy Durr said it is her company's understanding that final decisions won't be made until year end. Ciena spokesman Aaron Graham said no contract has been awarded, but the company is in the running for the optical transport business.
Sources from two other vendors in the process said these were actually invitations to the next round of testing, which will last three months, and the final winners will not be named until December. However, J.P. Morgan analyst Ehud Gelblum said those invited to lab testing will likely walk away winners.
Sycamore, whose shares rose as much as 27 percent, won the contract for optical digital crossconnects, Light Reading said, citing a vendor involved in the bidding and a federal equipment consultant. Sycamore and Cisco officials declined to comment or even confirm they are bidding for any of the work.
The U.S. Department of Defense's Defense Information Systems Agency is looking to build a large, global communications network that will combine fiber-optic communications and data routing products.
The contract is being broken into four parts: optical transport, optical digital crossconnects, multi-services provisioning platforms (MSPPs) and Internet routers. Each of the contracts is valued at about $100 million to $300 million.
In an optical network the MSPPs are the on-ramps, the optical transport creates the bandwidth and the digital crossconnects manage the bandwidth, while the routers are the big data switches.
HUGE POSITIVE FOR SYCAMORE
"The win for Sycamore is a huge positive for that company as it reestablishes the company in its core market," Lehman Brothers analyst Steve Levy said in a research note.
Cisco won the contract for the MSPPs, but a second supplier is likely, Light Reading reported.
"The win for Cisco is a positive surprise and also represents a negative event for Lucent, the supplier we thought had the best chance of winning this business," Levy said.
Prudential analyst Inder Singh said in a research note that indications were Ciena had discounted the transport portion in anticipation of winning the higher-profit crossconnect business. He said Corvis Corp. (CORV,Trade) may still be in the running to win some of the crossconnect contract.
Juniper reportedly won the contract for "core" Internet routers, Light Reading said. It did not identify a winner for the "edge" routers, but several analysts believe Cisco will win that business.
Core routers are used on high-speed connections between cities, while edge routers direct data where telecom service providers connect to customers at such locations as office parks, high-rise buildings and smaller central offices.
Lucent Technologies Inc. (LU,Trade) was not on the short list, but could still win some of the optical business, analysts said. Prudential's Singh believes it avoided overly aggressive, money-losing bids as it works to return to profits.
A Lucent spokeswoman declined to comment.
Sycamore shares rose as high as $5.25 and were still up $1.02, at $5.15 in Nasdaq trading, while Juniper shares were up slightly. Cisco and Ciena shares were off 1.2 and 2.4 percent, respectively, while Corvis shares fell 25.8 percent. Lucent's stock was up slightly on the New York Stock Exchange. (Additional reporting by Derek Caney in New York)
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