BLS) chose the companies to supply optical equipment for an upgrade of its local phone network. Terms of the arrangements weren't disclosed, but Monday's deals mark significant wins for the two big networking gearmakers in a tough industry spending environment. The bigger winner is Lucent, which continues to fight its way back from the steep decline of recent years. The BellSouth pact marks the second major win for the New Jersey company's new-generation synchronous optical networking, or SONET, systems. In late 2001, Lucent staked a
big claim to Verizon's ( VZ) future network expansion business. For Cisco, which is healthy but always scanning the horizon for new growth prospects, the victory is more symbolic. In that regard, the deal is a "huge win" for Cisco, which until now had failed to secure a major ongoing contract with any of the nation's four Baby Bells, says optical analyst Sam Greenholtz of Telecom Pragmatics. "These are conservative next-generation technologies," says Doug Green of Bradam Group, a Gainesville, Va., consulting shop. "These are safe bets with the companies that are going to be around." Observers caution that investors shouldn't draw too many conclusions about Cisco's prospects in the wake of the BellSouth deal. For one, most of the major contracts related to Baby Bell local optical expansions have been awarded. Also, BellSouth says the equipment deal falls within the company's current $3.5 billion spending plan, making any significant revenue improvements more of a longer-term opportunity. Still, Lucent and Cisco fans are probably happy enough just to have any revenue growth opportunities to point to.