A BLAST FROM THE PAST
ERIC COOPER: TRUE BELIEVER
Fore Systems' CEO explains why his company has kept the ATM faith.
By Alex Gove
One of Fore Systems' mottoes is "All roads lead to ATM," and there's no doubt that a lot of companies have been making their way to Fore lately.
Over the last two months, this Warrendale, Pennsylvania, manufacturer of Asynchronous Transfer Mode hardware and software has been the subject of numerous takeover rumors. Sources whisper that Ascend, Cascade, and 3Com have all taken a look at the networking company, only to pass. (One of these sources states that Cascade and Ascend are now considering a merger.)
The most recent company to court Fore (www.fore.com) is Lucent Technologies, which bought ATM manufacturer Agile Networks last year. Although Lucent may not be able to absorb such a large acquisition, mergers and acquisitions analysts argue that Fore represents the last chance for companies like Lucent, International Business Machines, Siemens, Alcatel, NEC, and Hitachi to enter the data communications market.
Fore (Nasdaq: FORE) has clearly enjoyed extraordinary success. With its strong focus on ATM technology, the company has managed to take a commanding lead in a quickly growing market, boasting a price-earnings ratio of 139.13 and a market cap of $2.86 billion.
But some Silicon Valley insiders wonder whether Fore is overvalued. They say that ATM is a niche technology that will be overtaken by the mainstream Ethernet/IP torrent as faster routers become available. (Not surprisingly, Cisco's chief technology officer, Ed Kozel, sides with this camp, declaring that "ATM has stalled." See "The Hub," page 84.)
Eric Cooper, Fore's CEO, denies that his company is shopping itself around and decries the practice of "armchair M&A." Although he admits that ATM to the desktop is not practical in most cases, he insists that ATM can work with Ethernet to provide a stable backbone in LANs as well as WANs.
Mr. Cooper claims that companies like Cisco that attempt to build an ATM strategy through acquisition are unlikely to succeed. They can't, he believes, compete with a company that has focused exclusively on ATM from the beginning.
The Herring: How do you respond to people who say that ATM is booming now but will become a marginal technology like Token Ring and FDDI when faster routers become available?
Cooper: I say, "Prove it." There's no road map that shows how routers are going to be cost-effective in the future compared with what ATM can do today, and ATM isn't going to stand still, either. In terms of the cost-effectiveness of switching data in the backbone of a network, ATM already beats routers hands down.
The Herring: Your competitors seem to disagree.
Cooper: The ironic thing is that Cisco and 3Com also believe in ATM's superiority. Because of their own obvious agendas, 3Com is more aggressive in admitting this, while Cisco says it only when it's cornered by a customer. But they both recognize it.
The Herring: Don't the long call setup times that ATM requires pose problems in an increasingly dynamic IP environment?
Cooper: ATM does have a long call time compared with a single packet, but compared with the lifetime of a session, it's very short. Say it's 10 milliseconds to set up a connection. How long is that connection going to be useful, and what's the alternative? It's like setting up a phone call. Yes, it takes a few seconds to dial, but then you have guaranteed quality of service when you're done. In the overall networking environment, servers and LAN emulation and so on make the other connections behind the scenes. So by no means do you involve connection setup every time you want to send data--only when you first talk to a new destination. If you look at your typical pattern of communicating with your computer, that's pretty rare.
The Herring: So you don't see ATM competing against an installed base of 100 million Ethernet nodes?
Cooper: Not at all. Ethernet complements what we're doing. If you look at our strategy, all of our products around the edge of the network involve Ethernet--or something else--to the desktop to ATM. Of course, ATM to the desktop is an option, but we recognize how much momentum Ethernet is going to have at the desktop level. We just want to provide a way of taking Ethernet into an ATM core to do what the Ethernet part can't.
The Herring: Isn't Gigabit Ethernet a threat?
Cooper: We believe it's an opportunity. We're a member of the Gigabit Ethernet Alliance and plan to support Gigabit Ethernet in our LAN switching product line. Where we're different from the uncritical press is in questioning Gigabit Ethernet's role in the backbone of the network. We agree that it can serve a useful purpose as a point-to-point connection and as a way to build small clusters, but we don't see it as a particular threat to ATM's role in the backbone.
The Herring: What approach are you taking to Gigabit Ethernet?
Cooper: We have acquired a company called Scalable Networks. As its name indicates, the company utilizes a LAN switching design that scales upward to the 10-gigabit range in terms of capacity, with multiple Gigabit Ethernet ports and multiple tens of Fast Ethernet ports per box. You'll see that it's a very natural fit into our LAN switching product line. But frankly, well before the Gigabit Ethernet switching market takes off, the battleground will be Fast Ethernet at high port densities. If you look at the Fast Ethernet switches today, it's rare to find switches with more than two dozen ports on them. It will be very important to have 40 to 50 ports per box and beyond.
The Herring: Cisco recently acquired Granite Systems for $220 million. What sort of a competitor do you think Cisco will be?
Cooper: I have always considered Cisco our chief competitor. I have a tremendous amount of respect for the company, but frankly, its success will help us compete against it, because it can't do everything as well as a more focused company can. And since it is largely a latecomer to ATM, it has had to rush to put in place a portfolio that is not internally consistent. Instead, it comes from different pieces through acquisition, and as a result, its ATM core is not as seamless as ours. In the Fore architecture, configuring an ATM switch to work in the local area vs. the wide area is simply a matter of choosing a different line card to plug into it. In Cisco's system, you make a radical jump from one product line to another. The result is that Cisco can't make the same promise to the customer that we can about how its investment will be protected and what will happen next year as its network grows; Cisco's approach takes away one of the chief benefits of installing ATM in the first place, which is scalability. We are focused on a single kind of network, which has ATM in the middle and LAN switching typically around the edge. Cisco has this lack of religion that they call a selling point but that we think is a weakness.
The Herring: Some people have framed the debate this way: Does ATM reach the desktop faster than Gigabit Ethernet hits the backbone?
Cooper: ATM is in both desktops and backbones today. Gigabit Ethernet is in neither. So one is a reality, and the other is just a promise. However, early on, when ATM was the only network technology above 100 megabits, there was an expectation that ATM would also go to desktops. I think that's likely to happen only in selected vertical markets. But ATM's strength in the backbone is stronger than ever. And just on technical grounds, I think Gigabit Ethernet is not likely to succeed on anything but small networks.
The Herring: If ATM does not have as broad a reach to the desktop as Gigabit Ethernet, will it ever become a pervasive technology?
Cooper: Absolutely, because backbone technology is an essential part of large corporate networks. And I think there is a continuum from what goes into the backbone that's on your premise to what goes into the backbone of a service provider network. Whether it's an Internet service provider or a private WAN, there is tremendous momentum toward ATM. And as we've seen, you can make the case very strongly in certain desktop areas as well.
The Herring: How would you characterize the battle among tag switching, IP switching, and multiprotocol over ATM, or MPOA?
Cooper: I would say that all three approaches are trying to get at the problem of how you make IP work well over switched infrastructures. But there's a more cynical way of ranking these proposals based on how much of the router status quo they preserve. With tag switching, you put all of your traffic through routers. Routers are the places where the intelligence is, and switches are basically slaves to what the router tells them to do. The Ipsilon Networks' IP switching approach is somewhere in between tag switching and the MPOA distributed intelligence route server approach that we and Newbridge Networks and others are taking. MPOA represents the biggest challenge to the status quo, because it says that routers and switches are on equal footing. There's intelligence in all the switches, and future network designs will require fewer routers than with the other two approaches.
The Herring: Does IP switching offer your competitors an entr‚e into the ATM market?
Cooper: I think only from a marketing perspective--not in terms of realistically providing solutions to customers. Frankly, I don't think IP switching by itself is enough reason for people to deploy ATM. In other words, unless there is a demonstrated commitment by the vendor to support interoperability with wide area ATM, with voice and video over ATM, and so on, I really don't see the advantage over existing routers.
The Herring: Fore has maintained a very high growth rate. How do you intend to maintain it?
Cooper: We've told folks for several quarters now that we're deriving most of our revenue from the corporate backbone segment of the market. We're also focusing more resources on going after the wide area service provider market. The service provider networks have grown up so fast, predominantly driven by the frame relay services around the edge.
But we see a shake-up in how those networks are implemented. We suspect that the frame relay service offering is going to be robust for quite a while, but these switches are simply not cost-effective as networks grow. We think ATM switches in the core with frame relay concentration around the edge is going to be a new paradigm. It's going to let service providers scale their networks more cost-effectively, and it's going to squeeze out some of the traditionally strong vendors in that space--Cascade and Cisco's StrataCom, in particular.
The Herring: How do you think those vendors will react?
Cooper: Well, both have hedged by developing ATM, but I think they are challenged, just as Cisco is challenged by the threat that switching poses to routing.
The Herring: How do you see Fore competing with 3Com, Bay Networks, and Cabletron?
Cooper: 3Com is probably the company that's most focused on an ATM-centric architecture. We compete with Cisco and 3Com more than with any other companies. Bay Networks has had a hard time executing in this area in terms of bringing the appropriate product to market with the appropriate features and price points. We've worked closely with Cabletron as a partner, so I wouldn't view it as a competitor--although obviously it has made acquisitions recently, and there is certainly the potential for conflict in the future.
The Herring: We have heard a substantial number of rumors within the past few months that Fore has been approached as an acquisition candidate. Is there any truth to them?
Cooper: I think it's fair to say we've had feelers, but obviously nothing has gone anywhere. Clearly when you're as focused and as successful in an area that has perhaps caught some of the larger players napping for a while, a good business development or M&A team is going to make inquiries. But that's basically as far as it has gone.
The Herring: Would you say that Fore is open to being acquired?
Cooper: That's not how we manage the company, no. With six acquisitions under our belt, we're in a position to be an acquirer rather than an acquiree.
The Herring: Can you confirm that Ascend took a look at the company?
Cooper: No comment on that one. If you look at any of the high P/E companies, there's a lot of armchair merger and acquisition speculation going on. I've been asked, Are Fore and Ascend merging? Are Fore and Cascade merging? Are Cascade and Ascend merging? All in that triangle. It's because we're all high P/E stocks. The slightest speculation is amplified in the marketplace.
The Herring: Perhaps people see a merger as a way for Fore to maintain its high growth rate.
Cooper: Yes, but quite frankly, I believe that is another reason to splash some cold water on these rumors. How would these combinations really affect our growth rate? There is no obvious way that the whole would be greater than the sum of the parts, and that is what I would look for in any kind of combination.
The Herring: Does it bother you that Fore has attracted so many of these M&A rumors?
Cooper: It doesn't so much bother me as it has been an education. This is part of what being a high-profile tech company is all about.
What a education!!!! |
