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Technology Stocks : Newbridge Networks -- Ignore unavailable to you. Want to Upgrade?

To: Glenn who wrote (7220)	11/2/1998 6:50:00 AM
From: Glenn McDougall	Read Replies (1) \| Respond to of 18016

A premature revelation from Newbridge Abatis, an unknown B.C. affiliate, provides the key to reading data packets James Bagnall The Ottawa Citizen ottawacitizen.com Newbridge Networks Corp. chairman Terence Matthews surprised a lot of people last week with his declaration that Newbridge had produced a major technical triumph. And little wonder. The breakthrough is a potentially revolutionary technique for screening communications signals. But it's still far from clear that Newbridge is in position to lead this revolution. Conceptually, what Newbridge has done is pretty basic. It's come up with a formula that will allow telephone companies and Internet service providers to open up 'packets' of data to determine whether these carry voice, data or video signals. In the industry, this is known as a 'packet classification' scheme. This technique, in turn, opens up a whole new world of commercial possibilities for companies like Bell Canada, which would be able to bill customers according to the type of signal they're sending. People would be charged more for voice calls than for sending electronic mail, for example, because voice signals would have to be assigned a higher priority on their trip through the network. This is because any delays in a voice transmission would result in a garbled conversation. On the other hand, the telephone company can wait for congestion on its network to clear a little before sending e-mails -- the message will still be intact when it arrives at its destination. Newbridge's packet classification milestone seems substantive because Mr. Matthews has said his company had already applied for a patent. However, investors should be wary of the risks before bidding up Newbridge share prices on this development alone. For starters, it appears the breakthrough is applicable only to communications networks built by Newbridge. That's a good start. But the key to creating a commercially successfully product is to make sure it also works with networks built with equipment from competing manufacturers such as Cisco Systems Inc. of California and Northern Telecom Ltd. Newbridge intends to do this. But the real drive towards interoperability may take place at Abatis Systems Corp. of Burnaby, B.C. -- a one-year-old affiliate of Newbridge. It was Abatis, with some assistance from Newbridge, that developed the mathematical formula (known as algorithm) that makes packet classification work. Because Abatis is starting with a clean slate, it has the luxury of building high-capacity networks designed with this algorithm in mind. Abatis is run by Adam Laurent, a former Newbridge engineer with plenty of experience in that company's labs. Among other things, the Burnaby outfit is developing systems for identifying voice and data signals across different types of networks. Even so, Newbridge and its affiliate are still a long way from building a universal packet reader. "We've been speaking to Newbridge's people for more than a year now and I don't think they have anything profound," says Feliks Welfeld, the president and founder of Ottawa-based Solidum Systems Corp., a two-year old startup that is developing its own products for identifying network signals. "There are many, many companies working on this and, yes, we think we are ahead of Newbridge," he adds. Of course, Solidum makes components while Newbridge and Abatis are developing a complete system for identifying what's inside packets. A system includes the network devices that actually look at packets to see what's in them. It also allocates network resources accordingly and keeps track of the features that customers have ordered. But, even though Solidum's vision is less sweeping, the company is already selling its software and hopes to begin shipping a piece of related hardware within two months. The timetable for Newbridge's packet classifaction technology is more fluid. Indeed, Mr. Matthews' revelation, which emerged during an interview last week with The National Post, was likely premature. Newbridge officials have been telling financial analysts that the technical breakthrough will be unveiled officially next spring at a major industry trade show known as Networld + Interop. The final product would start shipping months after that. The real test for Newbridge's packet classification scheme will come when it begins trying to convince potential customers and technical standards committees that its approach is the right one. "Neat technology on its own doesn't really mean anything," says Tom Nolle, president of Cimi Corp., a New Jersey-based consulting firm. "The problem right now is that the average buyer of this technology doesn't know exactly how (next generation networks) are going to be built, so they don't know whether to value Newbridge's breakthrough or not," he adds. Nortel, Cisco and Lucent Technologies Inc. of Murray Hill, New Jersey are all working on variants of packet classification schemes. Startups like Solidum and Nepean-based SiberCore Technologies Inc. are also developing pieces of the puzzle. For instance, Solidum has created a proprietary language that expedites the job of processing data packets and expects to create a $120 million-a-year business by 2004. But, like Newbridge, Abatis and the others in this rapidly growing niche, Solidum has to do a lot of evangelizing to make its views heard. Mr. Matthews' early revelation of a technical first is just the beginning of a lengthy race that will soon shift from the labs to the markets.