Foundry Networks sets high-speed Ethernet equipment release
Wednesday February 14, 5:53 pm Eastern Time
SAN FRANCISCO, Feb 14 (Reuters) - Foundry Networks Inc. (NasdaqNM:FDRY - news) said on Wednesday that it plans to release high-speed Ethernet networking switches this summer, as the slumping maker of data networking equipment seeks a turnaround.
The San Jose, Calif., company reported sales in its most recent fourth quarter of $105.1 million, down 7.2 percent from the previous third quarter, though earnings beat lowered projections.
Analysts blamed a cool reception for Foundry's high-speed Internet Protocol (IP) routers, and the company's reliance sales to emerging telecommunications service providers, who have cut back spending.
Foundry's upcoming Ethernet switches, aimed at large corporations, will be able to handle data traffic of 10 gigabits per second and be priced about ten times less than similar IP routers of the same speed, according to Michael Iburg, Foundry's treasurer, who was speaking at a technology investors conference held by Robertson Stephens.
The company is also de-emphasizing its research and development efforts in IP routers, which make up only 10 percent of Foundry's sales, the rest coming from sales of Ethernet switches of various speeds.
Ethernet networking was invented in the 1980s and has been the standard method for transmitting data packets in small, local area networks. But Ethernet is rapidly gaining converts as a technology for transmitting data quickly over longer distances, with Foundry and rival Extreme Networks Inc. (NasdaqNM:EXTR - news) among the technology's chief proponents.
The global market for Layer 2- and 3- and 10- gigabit Ethernet switches will grow to $10 billion in 2004 from $2 billion in 1999, according to Banc of America analyst, Shaw Wu.
Iburg acknowledged that few businesses needed 10 gigabit Ethernet switches right now, but predicted that demand would be driven by corporations buying in order to ``future-proof'' their networks for anticipated bandwidth usage.
The company's stock has fallen badly from its 52-week high of $212 to its ending price on Nasdaq on Wednesday of $15-3/16.
``While the company works a turnaround, we believe the stock will mark time,'' said Michael Ching, an analyst at Merrill Lynch who rates Foundry a ``neutral'' in a report released this week. But ``given that we are in the early stages of the Internet build out, we believe there is more than enough room for Foundry to thrive in the long run.''
Foundry is also aiming its IP routers for use at the edge of networks rather than the core.
Cisco Systems Inc. (NasdaqNM:CSCO - news) earlier this month introduced an IP router running at 10 gigabits per second, matching competing 10-gigabit IP routers from Juniper Networks Inc. (NasdaqNM:JNPR - news) and Avici Systems Inc. (NasdaqNM:AVCI - news), and leaving Foundry as the only major vendor of IP routers without a 10 gigabit router.
Iburg denied that Foundry was ``pulling back'' from the Internet routing market, saying that the company believed that the relatively high prices for IP routers compared to gigabit Ethernet switches would make them less popular in the market.
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