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Strategies & Market Trends : Zeev's Turnips - No Politics -- Ignore unavailable to you. Want to Upgrade?

To: puborectalis who wrote (19889)	1/8/2002 7:48:26 PM
From: puborectalis	Respond to of 99280

Old Article......Sonus prevails despite carrier spending cuts By George Chidi Network World, 09/10/01 WESTFORD, MASS. - Nestled in the woody hills of this rural town, 4-year-old Sonus Networks is emerging as a survivor in the battle for carriers' capital expenditures. The strategy: Package two key pieces of equipment that carriers need to transition their voice networks from traditional circuit switching to packet switching. "Carriers don't put pieces together," says Hassan Ahmed, Sonus' president and CEO. "They're lousy integrators. It's too difficult to build a piecemeal solution." To make carriers' lives easier, Sonus integrates two elements of next-generation network architecture, softswitches and media gateways. Traditional circuit switched network gear irreversibly combines the hardware that switches phone calls and the software that gives the intelligence to properly route calls and adds call features such as call waiting or three-way conferencing. The new architecture separates the software from the hardware. Softswitch software runs on off-the-shelf servers. Media gateways are hardware, changing a circuit signal to IP, frame relay ATM or vice versa, letting circuit-switched phone calls run on an IP network. Sonus bets carriers will need a package of gateways and softswitches for the edge of their networks, rather than separate items from separate vendors. Sonus acquired softswitch maker Telecom Technologies last November because its softswitch worked better than Sonus' - in phone companies' central offices where backbones connect to local phone lines, Ahmed says. Carriers began using packet technology on network backbones, which is where Sonus positioned its earlier technology. The edge of the network is next, Ahmed says. "We've been making the right bets," Ahmed notes. "We bet the core of the network would packetize first, and we won." Sonus' gateway-and-softswitch strategy differs from others in the field. Some companies, such as established players Lucent and Nortel, try to make every kind of network component. Independent media gateway and softswitch companies have struggled, while Sonus has performed better, analysts say. "They're a leading carrier gateway switch vendor, if not the leading," says Tom Valovic, director of IP telephony at market research firm IDC. "There are other companies that do nothing but softswitches. [Sonus'] softswitches are secondary. Their success is based on the media gateway." BellSouth uses a Sonus softswitch/media gateway package to lighten the load on the traditional circuit switches that feed Internet service providers. These switches are meant to deal with calls that last about 3 minutes, but calls to ISPs more typically last for hours. "The public switched telephone network is not designed to handle this kind of traffic," says Steve Turner, director of network transformation for BellSouth. "We felt that [Sonus'] solution would be able to off-load some of our traffic," he adds. Sonus equipment met BellSouth's standards for reliability and compatibility better than competitors', Turner says. "Sonus had a more mature solution. It met all of our needs for the application," he says. Carriers look to packet-based technology such as Sonus' softswitches and media gateways because it is more flexible and less expensive to deploy than traditional circuit-switched gear. Expanding the capacity of a traditional local circuit switch costs about 10 times what it costs for a softswitch/media gateway equivalent. Developers can write new software for a softswitch with relative ease compared with new software for proprietary circuit switches. These new applications can be tested in one or two markets to see how well they work and whether customers want to buy them, without buying a production run of million-dollar circuit switches. It is also possible to let customers directly add or cancel services from their carriers, rather than calling in changes and waiting for providers to process them. "Today, when you want to make a change in your service, you have to call someone and if you want something a little bit different you get transferred around a lot,"says Mike Hluchyj, Sonus' CTO and founder. "That's expensive for carriers. It would be nice if I could do it with [an Internet] browser," he says. Despite optimism from analysts and the company itself, Sonus' stock has had a bumpy ride. Sonus traded near historic lows at around $14.50 per share at the end of August, in part from a late-month hammering on news that WorldCom would cut its capital expenditures on new network equipment. The stock traded as high as $72 in August 2000, three months after its IPO, just as the market's bubble popped. Chidi is with the IDG News Service.