Ken, If LU isn't reacting in time, these guys surely look to be a threat....
www.cyras.com
Juniper's gardener fertilizes Cyras in $32 million round
By Tom Davey
Redherring.com
August 28, 1999
Big surprises can come in small packages. Cyras Systems, a secretive developer of optical networking products, will announce Monday that it has completed a $32 million second round of equity funding led by New Enterprise Associates. The one-year-old company competes with Cerent, which Cisco Systems (Nasdaq: CSCO) plans to buy for $7 billion.
Music behemoths unite in Web site
Intel and Digital Microwave heat up Ensemble
Netpliance plies Internet gizmo
Cyras's backers are confident the startup has revolutionary optical switches that could render obsolete the technologies of mainstream telecommunications equipment companies, such as Lucent Technologies (NYSE: LU) and Nortel Networks (NYSE: NT).
Cyras, which has raised $47 million since its inception, is now worth $118 million based on the current round. In addition to NEA, its backers are Menlo Ventures, El Dorado Ventures, Draper Fisher Jurvetson, and France's ViVentures. Chip entrepreneur Dado Banatao personally invested, as well.
Cisco puts a lot of stock in Cerent's technology.
Mr. Banatao, founder of S3, helps the Mayfield Fund find good semiconductor investments.
NEA's $12 million contribution, for a 10 percent stake, is the most it has ever invested in a company, says general partner Peter Morris, who also led venture investing in the hugely successful Juniper Networks (Nasdaq: JNPR). The round will probably be Cyras's last private equity, as the company hopes to go public in about a year after it shows revenues, says Doug Carlisle, a general partner at Menlo Ventures.
So far, Cyras has been operating in stealth mode, shunning publicity. The 60-employee company, based in Fremont, California, has not briefed any industry analysts, nor has it received any press coverage -- until now. "They don't want to signal their strategy to anybody until after they secure their key customers," says Mr. Morris. "The competition can call you a vaporware company."
Mr. Morris notes that Juniper took the same approach before launching one of the most successful IPOs on record. Juniper, which went public in June, is now worth $10.9 billion.
Cyras has been developing chips, known as ASICs (application-specific integrated circuits), that will go into Synchronous Optical Network (SONet) switches it is designing. The company plans to have its state-of-the-art OC 192 switches in the hands of major telecommunications companies for testing early next year. Revenues are expected to follow before mid-2000.
HERE'S THE BEEF
Its switches will transmit data at up to 10 gigabits per second. To put that mind-boggling number in perspective, the switches will move data at more than 6,000 times the capacity of the T1 lines that most companies use to connect to the Internet.
Switches of that caliber are now commercially available only from Nortel. To top it off, Cyras's products will be "a third the price, a tenth the size, and half the complexity of existing products" from companies such as Nortel and Lucent, Mr. Carlisle claims. Cyras's current chip technology, he adds, should be able to double the capability to 20 Gbps in the near future without a redesign.
Rival Cerent's switches transmit data at 2.5 Gbps, but the company is also developing future generations. It already has 86 customers. But so far, none of them are the largest long-distance carriers or the baby Bells that Cyras is hoping to attract. Both companies are anxious to draw the attention of the biggest carriers, which typically take their time before making major commitments to new technologies.
Cyras's venture backers say there should be plenty of business for several companies in the market. Analysts say the current market for SONet switches is more than $8 billion and growing rapidly.
Cyras's backers criticize the older telecommunications equipment vendors, such as Nortel and Lucent, as being burdened by bureaucracy and internal mandates to crank out revisions of old products rather than taking revolutionary leaps. "The traditional equipment suppliers are as vulnerable today as the mainframe companies and the mini-computer makers were before the PC," says Mr. Carlisle.
Some analysts question that take. "The big boys like to buy from Lucent and Nortel," says Maribel Lopez, an analyst at Forrester Research (Nasdaq: FORR). "Companies like Cyras have limited potential as standalone players, but tremendous potential if they're owned by someone else."
Does Cyras have Cisco envy? Not a chance, says CEO Steve Pearse, a former Nortel executive vice president. "We're not out to get acquired," he says. "We want to go public and be a far bigger player than our competitors." |
