**NEWS** Cisco Takes 10% Stake In New All-Optical Router Technology
Businessweek- To be available to the public Monday May 24th, 1999
Ciena's Founder Is Back -- with Better Technology and
Cisco's Backing
David Huber's Corvis Corp. is set to unveil a new low-cost, high-capacity fiber-optic
technology
Cisco Systems has quietly taken a stake -- almost 10% -- in Corvis Corp., a
Maryland startup with plans to soon unveil a technology for directing data
from one city to another, known as an all-optical router. The technology
could radically cut the cost of moving long-distance voice and data traffic.
Corvis is the brainchild of Ciena Corp. founder David R. Huber. He was the
lead inventor of Ciena's dense wavelength division multiplexing (DWDM)
technology, which expanded the capacity of long-haul fiber optic cables by
16 times. That technology was hot enough in 1997 to let Ciena break the
all-time record for sales by a startup during its first year of shipping products
and made Ciena the most valuable startup ever on the day of its IPO. But
Ciena has since struggled, as larger competitors like Lucent Technologies
and Northern Telecom entered the DWDM market. Its stock fell to a May
17 close of $28.56 after hitting $92.375 last summer.
Huber left Ciena two months after its IPO, losing a showdown with Ciena
CEO Patrick H. Nettles. Nettles prevented Huber from winning board
approval to develop products to expand Ciena's bandwidth-multiplying
technology from hauling traffic over inter-city fiber optic cables into the
related market for switches.
INTEGRATED GEAR. Cisco is now investing in the same product Ciena refused
to back, Huber says. At the time, Ciena said it believed the technology for
optical switching was far from being ready. When Huber left, his Ciena stock
was worth more than $300 million. He said on May 17 that despite two
rounds of venture investment and the Cisco stake, he remains the largest
investor and has supplied about half of the money behind Corvis.
Corvis' product integrates switching and long-distance data hauling, which
have previously been separate -- and expensive -- parts of moving
telecommunications traffic. The system has three major innovations, says Mat
Steinberg, an industry analyst at Ryan Hankin Kent Inc. in South San
Francisco, Calif.
First, it transmits much stronger optical signals than those of competing
systems from Ciena and Lucent. That means a signal can travel up to 3,200
kilometers through a fiber cable in optical form, compared to about 500 to
600 kilometers for existing systems. Long-distance carriers could
conceivably eliminate up to 80% of the cost of converting optical signals
back into the form of electricity, boosting their power with electrical
equipment, and then converting the signal back into the form of light. "In a
complete national network, that's 60% to 80% of the long-distance
backbone's network costs," Steinberg says. "[Ciena's] DWDM got rid of a
lot of that. This is going to get rid of a lot more."
Corvis Vice-President for Sales and Marketing Moise Aujis says his
company's system can replace $75 million of equipment with a machine
costing less than $10 million. Corvis' machine will be shown at the
SuperComm trade show in Atlanta next month and will ship later this year.
The company says it has hired about 80 manufacturing workers.
Second, Huber's machine also lets fiber carry much more traffic -- it
multiplies fiber's raw capacity by up to 160 times, compared to 40 to 80
times for most DWDM systems on the market. And third, it offers all-optical
switching capacity of 2.4 terabits per second -- far more than existing
systems. Steinberg agreed with Huber's assessment that Corvis' technology
may be up to two years ahead of its competitors.
NO QUICK IPO. Terms of the Cisco investment were not disclosed.
Michelangelo Volpi, Cisco vice-president for business development,
described the price as "not unreasonable for a company in the protoype/beta
test phase." Volpi is taking a seat on Corvis' board, which includes venture
capitalists from Kleiner Perkins Caufield & Byers and New Enterprise
Associates, two of the biggest and most aggressive technology investment
firms. NEA founding partner Frank Bonsal says Corvis "has as much or
more potential as any firm NEA has invested in since 1978," a list that
includes UUNet Technologies, Ascend Communications, and 3Com.
Huber says Corvis won't go public anytime soon: "Unlike most Internet
companies, we want a few good quarters of financial performance."
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