re: Cisco needs a light pump. Quick.
First they said they still had enogh time to sort things out because the others were having problems, and by the time the technology worked itself out they'd be the proud owners of a more mature solution. Now, it seems, they don't have that much time left, after all. Internet Time. Peculiar, isn't it? Didn't Cisco help invent it?
------from Forbes:
"Cisco weighing buyout of Corvis"
December 15, 1999
Cisco weighing buyout of Corvis
By John Shinal
NEW YORK. 7:50 PM EST-Cisco Systems (nasdaq: CSCO) is
evaluating startup Corvis as a potential acquisition to enhance its
position in the burgeoning market for optical networking equipment,
sources close to the companies said.
However, the sources say preliminary discussions have yielded no
agreements and no deal appears imminent. Officials at Cisco and
Corvis declined comment on whether the companies are in talks.
Cisco took an undisclosed minority stake in Corvis during its third
round of financing earlier this year and Mike Volpi, a Cisco senior
vice president who heads the company's acquisition team, is a Corvis
board member.
At Cisco's annual analyst meeting Dec. 1, Executive Vice President
Don Listwin said the company was evaluating optical technologies
and might wait up to 12 months before deciding to either acquire or
develop any additional products. However, now that Cisco rival
Nortel Networks (nyse: NT) has agreed to buy Corvis rival Qtera for
$3.25 billion, some analysts said Cisco may have to speed up its
timetable.
"Cisco will be forced to do something in optical sooner rather than
later," said Paul Johnson, an analyst at BancBoston Robertson
Stephens, who rates Cisco a "buy."
The sources said that Nortel made an offer to buy Corvis, and that
the bid was turned down. Corvis Chief Executive David Huber
values his company at more than $3.25 billion, they said.
Telecommunications service providers such as Qwest
Communications International (nasdaq: QWST), Williams
Communications (nyse: WCG) and MCI WorldCom (nasdaq:
WCOM) want optical equipment to increase the speed and
efficiency of their networks. The equipment made by Qtera and
Corvis increases the distance that light can travel on fiber optic
networks without being regenerated. Such signal regeneration is
inefficient and accounts for more than 30% of the cost of long
distance network equipment, says Tom Valovic, an analyst at market
research firm International Data Corp.
The Corvis product line includes equipment for both transmitting
data over fiber and switching it to other networks. Corvis' gear will
begin field trials with Qwest and Williams early next year. Qtera's
gear also has been tested by Qwest and a Qtera spokesman said the
product will be commercially available in the first half of 2000.
Nortel, Lucent Technologies (nyse: LU) and Ciena (nasdaq: CIEN),
which Cisco evaluated but chose not to buy last year, are among the
leaders in a type of optical networking equipment known as
wavelength division multiplexers (WDMs). WDMs increase the
capacity of fiber optic networks by splitting beams of light traveling
on the fiber into multiple colors, or channels.
Corvis's Huber also founded Ciena, which pioneered the WDM
market.
Cisco has no WDM products for sale, and many analysts believe
they need to have them to compete with Lucent and Nortel. IDC
predicts U.S. sales of WDM gear will total $2.1 billion in 1999 and
more than double to $5.1 billion by 2003. Nearly all WDM sales
today are for gear that carries long distance traffic. Sales of so-called
Metro WDM, which handle traffic on dense networks in large cities,
are expected to take off next year, Valovic said.
Listwin said at the analyst meeting that the company will use
technology it acquired when it bought optical startup Cerent to build
a Metro WDM product, yet that may take more time than the
company has. Cerent's product is a new type of gear that links the
synchronous optical network (SONET) equipment that carries
regional voice and data traffic with the routers that direct Internet
traffic. Cisco is the dominant maker of such routers, while Nortel is
the leading supplier of SONET in North America.
The $3.25 billion Nortel paid for Qtera is less than half the $7
billion Cisco paid for Cerent. Cisco Chief Executive John Chambers
said last month the company expects $300 million in Cerent product
sales in 2000. As with Corvis, Cisco had a minority stake in and a
board seat at Cerent before it agreed to buy the company in August.
Because of the huge growth expected in the optical networking
market, investors have rewarded optical networking companies with
stunning valuations. Sycamore Networks (nasdaq: SCMR), for
example, has reached a market worth of more than $18 billion after
less than two months as a public company.
Some analysts, though, are skeptical that those valuations will hold
up and said it may be prudent for Cisco to wait before shelling out
an amount similar to its Cerent purchase for nascent or unproven
technologies. "Cisco may be waiting to make a more rational offer"
when the valuations shrink, said Kevin Slocum, an analyst at
SoundView Technology Group.
=====
This story was published by Forbes Digital Tool (www.forbes.com)
on December 15, 1999. |
