INTERVIEW-Cerent launches debut networking system
February 16, 1999 01:47 PM
By Simon Hirschfeld
NEW YORK, Feb 16 (Reuters) - Cerent Corp., a recent telecommunications equipment start-up, on Tuesday unveiled its sole product, a networking system which it said gives service providers an easier, cheaper way to upgrade their networks.
Located in Petaluma, Calif., the privately held company has caught the attention of one of the biggest names in networking equipment. Cisco Systems Inc. CSCO , whose routers direct a majority of Internet traffic, was the lead investor in a recent $53 million round of financing.
Other investors include several venture capital funds, and telecom systems maker Advanced Fibre Communications Inc. AFCI , whose chief executive, Don Green, sits on the board.
Cerent, which was founded in early 1997, has developed a "multi-service SONET transport system," the Cerent 454, that allows carriers to upgrade their networks at the middle, or "transport" portion of the network.
Despite a rush to add capacity to communications networks to accommodate burgeoning data traffic, most recent upgrades have been focused on the "access" portion, where users link up to the networks, and the "core" portion, where carriers receive and direct traffic.
The 454 is an upgrade for networks using SONET, the standard network protocol in North America for telephone service carriers. SONET was designed for the relatively constant streams of voice traffic and needs to be upgraded to better handle "bursty" data traffic, which is rapidly overtaking voice.
Housed in a 19-inch box, the product allows carriers to handle data sent in various standards, including the language used by Internet traffic, without scrapping their current infrastructure.
Despite "all these discussions about ripping out the old and putting in the new, customers are reluctant to do that, preferring to evolve," Carl Russo, Cerent's chief executive told Reuters. Russo was formerly chief operating officer of mobile telecom equipment maker, Xircom Inc. XIRC .
Before the 454, carriers have had to use a seven-foot rack costing twice as much to achieve a similar effect. Makers of those racks include Lucent Technologies Inc. LU , Canada's Nortel CA:NTL NT and France's Alcatel SA . With only one product, Cerent does not currently threaten those telecom equipment giants, but it suggests the potential ability of small innovators to find chinks in their armor.
The product is aimed at all phone service providers in what Russo says has the potential to be a $5 billion market. But so far Cerent has focused on competitive local exchange carriers, or CLECs, which compete with incumbents such as the Baby Bells, mostly for business accounts.
Russo declined to disclose the company's revenue figures, but said the company currently has about 40 customers.
"They're going after carriers that are the newer guys on the block," said Lisa Pierce, an industry analyst with advisory firm Giga Information Group. "But the product is actually more useful to an incumbent," with its greater store of customers, she added.
Pierce said that CLECs may provide easier sales for Cerent, noting that a new business needs immediate cash to survive. Big players such as the Bells will "kick the tires" for a couple of years, according to a Cerent spokesman.
((-- New York Newsdesk 212-859-1700)) REUTERS
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