Ciena's buying two firms so it can bring more to the edge

Ciena announced today it is buying two small companies ��Tibit and Benu ��to add more to its arsenal in fiber-based broadband access and subscriber management at the network edge. The company names sound like a couple of characters in a Star Wars spinoff, but the trend they represent is more science than fiction.

These are positive moves for Ciena, according to Rosenblatt Securities Analyst Mike Genovese, who wrote about the deal in a note to clients on Tuesday. Ciena is looking to use its switching and routing platforms to win more business in the edge networking and fiber broadband markets, "which are in a strong and long multi-year growth cycle," he wrote.

Genovese noted that one of Ciena's primary customers, AT&T, intends to continue growing fiber access, even as it fights through mounting debt and economic headwinds. The carrier aims to pass 3 million to 4 million more homes with fiber between 2023 and 2025.

"We believe AT&T is the largest customer for Ciena's PON [passive optical networking] solutions and there are good opportunities to win share at other Tier 1 telcos and cable MSOs [multiple system operators] where Ciena has switches and routers deployed," Genovese wrote.

"Ciena has already announced a number of product enhancements and customer wins specifically using 10G PON transceivers housed within their access and aggregation switches," wrote Kyle Hollasch, Cignal AI's lead analyst for optical and routing hardware, in an email to Light Reading. "The Tibit acquisition brings a degree of vertical integration into an application that Ciena considers an important differentiator."

Ciena said it would buy the remaining Tibit shares it does not already own in a deal valued at about $210 million. Tibit combines PON-specific hardware and OS into a micro pluggable transceiver that can easily integrate into a carrier-grade Ethernet switch, enabling rapid PON deployment. Light Reading has reported that the device works well for cable and telco networks as it meets 10G-EPON and 10G GPON (XGS-PON) standards in a single device.

Ciena said its Benu acquisition would allow the vendor to deliver a single solution that integrates routing, optical line termination (OLT), subscriber management and network services.

"Traditional edge routers include tightly integrated subscriber management, but virtual and/or cloud-based BNG [broadband network gateway] functionality is gaining traction, and this is where Ciena sees its opening," wrote Cignal AI's Hollasch. "The Benu acquisition bolsters Ciena's expertise in this area as they increase scale and move up the stack to become a more full-featured router vendor."

Fiber-fueled frenzy

Since 2015, Ciena has bought seven companies, and a few of those have included virtual routing and switching, network performance management, and other tools to help communications service providers of all types better control, automate and manage their networks.

The latest deals are expected to close during Ciena's fiscal first quarter of 2023, and both seem to be market expansion at just the right time, according to analysts.

Routing and switching was 12% of Ciena's revenues in its fiscal third quarter and grew 45% year over year, according to Catharine Trebnick, a managing director at MKM Partners (and a former Light Reading editor). According to Ciena and analysts, the addressable market of the entire metro networking and edge (excluding China) has grown to $22 billion. Fiber broadband access is seen as the biggest driver in that segment.

"We view these two acquisitions as broadening its market reach into rural broadband infrastructure opportunities that are funded through the Infrastructure bill," Trebnick wrote in a note to clients on Tuesday.

Heavy Reading Analyst Sterling Perrin, in a note to Light Reading, said that the global pandemic hit the accelerator for fiber broadband and � even with all the expected delays and bureaucracy � the massive government funding bill lessens a lot of the risk companies like Ciena would face by investing and making more bets in this space.