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Technology Stocks : LAST MILE TECHNOLOGIES - Let's Discuss Them Here -- Ignore unavailable to you. Want to Upgrade?

To: MikeM54321 who wrote (6819)	4/13/2000 7:36:00 PM
From: jbe	Read Replies (2) \| Respond to of 12823

More details on Lucent/Terabeam deal, from Redherring: ---------------- \| Terabeam scores Major League alliance with Lucent By Phil Harvey Redherring.com, April 13, 2000 With its new venture with Lucent Technologies (NYSE: LU), Terabeam Networks improves its chances of becoming a significant provider of Internet service for the so-called "last mile." Terabeam announced Wednesday that it is starting a new company with Lucent to make and sell equipment needed to provide its fiberless optical Internet service. The new company will be called Terabeam Internet Systems (TIS). Terabeam, which received $105 million in funding from various investors earlier this week, uses lasers to bridge the bandwidth gap between fiber networks that traverse the country and local area networks (LANs) inside buildings. The company uses a network of hubs that send a low-power light through office windows carrying data at speeds of up to 1 gigabit per second. That means the service could deliver data that is the equivalent of 200 copies of a 950-word dictionary in 8 seconds. It's also 66 times faster than a standard T1 line, which runs at a mere 1.5 megabits per second. BEAM THEM UP TIS will make the equipment needed to provide Terabeam Networks's Internet service. It also gives Terabeam a chance to have more than one initial public offering (IPO). "Having two IPOs would give us the opportunity to appeal to more investors," says Terabeam CEO Daniel Hesse. The partnership with Lucent will not only offer Terabeam the chance of a double-play in the public markets, but it will help quell concerns as to whether Terabeam can acquire equipment quickly and inexpensively enough to bring its service to cities worldwide. As part of its deal with Terabeam, Lucent will take a 30 percent stake in TIS and will invest $450 million in cash and products to help the new company offer its commercial last mile service. Lucent also will become TIS's preferred supplier of optical components, networking equipment, and professional services. Earlier this week, Mr. Hesse told Redherring.com that Terabeam would fare better as a service provider than by selling or licensing its technology. His rationale: the market has given a higher valuation to service providers, and focusing on services means it won't compete head-to-head with large networking equipment companies, he said. Why did Mr. Hesse change his tune? With a partner the size of Lucent, TIS should have no trouble competing with large, established equipment providers. Terabeam's third-round investors, which include four telecom carriers, didn't even know that the company was striking a deal with Lucent when they were faxing term sheets some weeks ago. The formation of a new entity helps to prevent Terabeam from eroding its value as a service company, and it helps Lucent to keep from investing in a service provider that would compete with its customers. The rub here is that TIS will have only one customer -- Terabeam Networks -- until it's clear that Terabeam will have no trouble scaling its business. Of course, Lucent's other ties with fixed wireless companies such as Winstar (Nasdaq: WCII), which Terabeam will compete with, couldn't restrain Lucent boss Rich McGinn from heaping praise on Terabeam's innovation. "I expect to look back some years from now and see that this was one of Lucent's most significant investments in the optical space," he said during a press conference Wednesday. Mr. McGinn claims that the formation of TIS -- which essentially gets Lucent into the services game -- will not pose any conflict with its service customers, such as Winstar. HAMMER THE DETAILS The swell of support for Terabeam shouldn't take away from the fact that it still hasn't captured any customers and still can't say for sure when it will be finished with customer trials. The tie with Lucent, though, has emboldened the company and made its investors very happy. Mr. Hesse predicts that the company's service will be available in 100 cities worldwide in the next four years. Rolling service to several cities, sometimes simultaneously, will be quite a challenge even if Terabeam can install a system at its customer's location in less than two hours. For each customer, Terabeam has to take historical weather conditions and the building's shape into account. Also, its engineers must custom-shape the beams of light from the hub stations for each customer to ensure a certain level of service. Those additional factors will add an undetermined amount of time to each installation. Terabeam and TIS also will have to face another kind of challenge where coaching from Lucent will prove helpful: the business of securing and defending technology patents. Sources close to Dominion Communications, a Bryan, Texas-based engineering outfit, say Terabeam may soon be in patent infringement talks with Dominion, specifically concerning its fiberless optical technology. Interestingly, Terabeam founder Greg Amadon has been in a patent pickle before. A virtual reality equipment firm he led a few years back, Virtual I/O, once had to pay Forte Technologies $75,000 to settle a patent infringement suit. Virtual I/O, whose largest creditor was TCI, shut down in early 1997, after filing for Chapter 11 bankruptcy protection and burning through some $19 million in funding. Any patent infringement inquiries Terabeam has received so far don't ruffle Mr. Hesse. "We'll continue to get those letters [claiming patent infringement], and we've filed for our patents as well," he says. "To any really successful company with important intellectual property, this will be just an ongoing part of business." Oh, well. Twice the companies and twice the IPO potential will mean twice the due diligence, right? redherring.com