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Technology Stocks : Ascend Communications (ASND) -- Ignore unavailable to you. Want to Upgrade?

To: MMW who wrote (58222)	12/20/1998 9:50:00 AM
From: Kent Rattey	Respond to of 61433

FIRST TERABIT ROUTER HITS MARKET By Georgie Raik-Allen Red Herring Online December 18, 1998 NetCore Systems is hedging its bets. The network equipment startup can't decide whether to build ATM switches for incumbent voice carriers or IP routers for the future universal network, so it's doing both. NetCore has just shipped the first terabit-speed router to market. Its initial customer, St. Louis-based Internet service provider Savvis, will soon have the capacity to deliver data over the Internet at speeds of 2.5 terabits per second. While the first-to-market call is a great marketing line, it is not clear that it gives the startup much advantage in a market space crowded with firms attempting to take on the router king, Cisco (CSCO), to build equipment for the next-generation Internet. According to NetReference analyst Dave Passmore, "NetCore may have been first to market, but the competition is trailing close behind. I expect many startups in this space to release products in the first half of 1999." Two great tastes NetCore differentiates itself by integrating asynchronous transfer mode (ATM) switching and Internet Protocol (IP) routing in a single networking platform it calls the Everest Integrated Switch. Some players in networking space, such as Ascend, are only building ATM equipment for the incumbent voice carriers, and others, such as Juniper and Nexabit, are building equipment for the network of the future, which many believe will be just IP-based. NetCore claims -- and analysts agree -- that it is the only startup to build equipment that integrates both capabilities. The advantage, Mr. Passmore says, is that NetCore appeals to many of the incumbent carriers, such as competitive local-exchange carriers (CLECs) who are currently building networks. "Under the covers, the NetCore product is basically an ATM switch. It is a great product to have shipping now, because it is focused on today's markets," he says. The disadvantage of the Everest Integrated Switch is that it is not designed for an IP-only network, which most analysts agree will be the universal carrier for all future communication. "The product may not be optimized for that world," Mr. Passmore says. NetCore vice-president of marketing John Shaw says, "we are looking at the networks of today. An IP network is 10 years away." Mr. Shaw claims NetCore can deliver high-level performance on an IP network, but says, "Why give up on ATM, if we can provide both in one box?" Senior technology analyst at BancBoston Robertson Stephens Paul Johnson agrees. He calls NetCore "terrific" for three reasons. "Combing ATM and IP is unique, they are offering a box that will scale on IP very rapidly, and it is available now." He says the "scalability in a box" that NetCore can offer makes the technology companies that provided the technology to build today's Internet, such as Cisco, "sort of vulnerable." Or, we think, sort of likely to see NetCore as an acquisition target. The future of networking The Cimi Corporation estimates that over the next 10 years, $380 billion will be spent transforming the Internet into a high-performance, commercial network. NetCore is not the only terabit-speed startup that wants a piece of the action. Dozens of innovative young companies are working on carrier-class IP networking technology to take on Cisco, which currently owns 90 percent of the ISP router market. It's an expensive proposition that gives IP incumbents such as Cisco and 3Com (COMS) a natural head start, but venture capitalists are getting behind the best new startups in the space. Juniper Networks has raised more than $60 million from its investors; Nexabit, which claims to be beta-testing a 6.4 terabits per second router, recently closed a $20 million round from Paul Allen's Vulcan Ventures; and Avici Systems has raised more than $70 million in less than two years. NetCore announced this week that it closed an $18 million third round of funding, bringing total investment to more than $30 million. New investors include Institutional Venture Partners (IVP), Matrix Partners, North Bridge Venture Partners, and Worldview Technology Partners. It's a competitive market, and while there is definitely room for more players, many of the router startups are destined to merge or be acquired. "This industry is characterized by a great deal of consolidation and acquisitions," Mr. Shaw says. "We understand that is a possibility."