Monday, December 31, 2001
Upstarts Line Up Vs. Big Boys
investors.com
"Cisco Systems Inc. (CSCO) and Juniper Networks Inc. (JNPR) are the two
champions of routers. They jointly command 95% or so of the market for
these complex machines.
But buoyed by the belief that the growth of the Internet will spark a big
leap in what's required of new routers, at least four start-ups have
emerged to take on the big boys.
These companies are betting that the growth of data traffic will
overwhelm the routers now made by Cisco and Juniper, and that they can
beat these two leaders to the next-generation punch. Routers send and
direct data over the Internet and other networks.
The new router start-ups are mostly keeping a low profile. But their game
plans appear similar.
All hope to lead in developing routers that can link together easily, and
thus keep up with the huge volume of bits and bytes traversing the globe
via the Internet and other computer networks. And all say they plan to
release products in 2002.
"Data traffic volume is growing 60% to 100% a year," said Stephen
Kamman, an analyst with CIBC World Markets. "Backbone networks will
need to be rebuilt to accommodate this growth."
Longer-Lasting Gear
Kamman speaks of the market for what are called core routers. It's the
target of the start-ups. In the first nine months of 2001, sales of core
routers rose to $1.8 billion from $1.5 billion in the year-earlier period,
says marketer Dell'Oro Group.
Kamman sees the market doubling in five years. He says he's
"absolutely certain that core routers will have the fastest return to growth"
in the overall networking field.
The router start-ups hoping to ride this wave are Canadian firm Hyperchip
Inc. and three California companies: Pluris Inc., Caspian Networks Inc.
and Procket Networks.
All are working on new routers designed to last five to seven years.
Today's routers last about two years before the data push overtakes
them. But with telecom carriers and other service providers cutting back
on spending, the new routers must not only be more powerful, they must
last longer.
A doubling of performance is the bare minimum needed to get into the
labs at a customer like AT&T Corp. (T) Bill Leighton, AT&T's vice
president of network development, says smaller improvements on
routers won't cut it.
"I'm looking for a product that's twice as good as what I have now,"
Leighton said. "I'm interested when something is an order of magnitude
better."
For network service providers, the key is how many "connections," or
ports, they can get with a core router, to service their many thousands of
end-users.
Today's routers from Cisco and Juniper can link together, but at a cost of
efficiency. For example, one of Juniper's top routers can accommodate
eight of the highest-speed connections. But two of them linked together
would not accommodate 16 such connections. They would accommodate
12 or 14.
Basically, the linking of the routers uses up some of these connections.
Next-generation routers are trying to come up with ways to link to one
another without taking up connections that can be leased to customers,
says Brian Berry, chief executive of Hyperchip.
That's a big issue, says Faizel Lakhani, a Caspian vice president.
"Even by conservative estimates, Internet traffic is doubling each year,"
said Lakhani. "Existing routers are designed for a 50% growth rate at
best."
Pluris says its gear can link 128 routers without using any
revenue-generating connections. Hyperchip has the ambitious goal of
being able to link 3,000 routers. Caspian and Procket haven't yet
revealed plans.
The router leaders, meanwhile, aren't standing still. Juniper reportedly is
working on a next-generation router that will match the speed of Cisco's
fastest router. But it will be able to connect up to 12 routers without using
the revenue-generating connections.
Juniper won't talk about future products. But in the last two quarters it
boosted spending on research and development to about 20% of
revenue. Its average had been 15%.
Cisco will say even less about its next-generation router.
The new router gang has tapped expertise in large-scale computing. Two
of Procket's three founders came from Sun Microsystems Inc. (SUNW),
which specializes in large servers.
Parallel Computing
Hyperchip's main expertise is in designing so-called parallel computing
systems. That's a way of doing many data operations at once.
"We looked at many different markets for (parallel computing)," said
Richard Prytula, a Hyperchip investor with venture firm TechnoCap. "The
supercomputer market is too small. Core routing is larger."
Hooking up many routers together means systems must be faster. One
way to boost speed is by using fiber optics. There are less expensive
optics today that makes it possible to cost-effectively use them in core
routers, says Joe Kennedy, chief executive of Pluris." |
