Maybe it's better that Intellambda Systems Inc. won't be demonstrating its new product on the Supercomm show floor, because the technology won't be the part everyone asks about.

The two-year-old startup emerged this month with a combo DWDM and packet-processing box that's attracting attention from carriers in Europe, Asia, and North America. But what's really drawing attention to Intellambda are its ties to a cluster of companies and New World TMT Ltd., the apparently unhappy Hong Kong investor that's backed all of them.

New World's ire appears to be directed at Tony Qu, CEO of Intellambda and several other companies including Prediwave Corp. In May 2004, New World filed suit against Qu, PrediWave, and at least some of the other related companies, demanding roughly $700 million after allegedly losing a like amount invested in the startups and spent on PrediWave's video-on-demand products. PrediWave, meanwhile, has filed a countersuit.

Incorporated in the Cayman Islands, New World is a subsidiary of Hong Kong conglomerate New World Group. A recent Forbes article says New World TMT rapidly invested in a series of U.S. startups led by Qu, who had no previous technology experience and had been rejected by Silicon Valley's venture capitalists.

Going on the theory that any publicity is good publicity, Intellambda might be happy that all this news is breaking just as the company debuts. But officials are quick to distance themselves from New World's goings-on, and they note that Qu isn't involved in Intellambda day to day.

"A lot of the stuff going on in the news -- that's different from us," says David Psutka, Intellambda's director of product management.

He may have a point. New World acquired Intellambda despite the imbroglio with Qu, according to New World's June 2004 annual report. New World had already invested in Intellambda to the tune of HK$377 million -- about $49 million in U.S. dollars -- and seems confident the startup can deliver.

"Despite the litigation against Mr. Tony Qu, the directors of New World] remain confident in the technology held by Intellambda and consider that there is no reason to believe why Mr. Tony Qu would not pursue, if not harder because of the presence of [New World] as a shareholder keeping a close eye on the performance, the business objective of Intellambda and make it a successful operation," New World's chatty annual report states.

But it's not all smooth sailing. New World got a director appointed to Intellambda's board, but Intellambda isn't disclosing all its financial data to New World, not until "certain conditions" get met, according to the annual report.

With all the mystery involved, it's no surprise that the technology community hasn't seen much of Intellambda. DWDM sources (that's people, not lasers) tapped by Light Reading had no idea who Intellambda was until its press release came out this month (see Intellambda Intros Packet-Over-Optical Switch and Big Launch! Stay Away!).

Intellambda purports to combine a DWDM box with packet processing, using an architecture based on off-the-shelf chips such as network processors. On the packet side, Intellambda claims to inspect traffic and apply quality of service (QOS); this is done at Layer 3, although Psutka contends the architecture can operate at higher layers, too. "When you're a startup company, you don't want to take on the world all at once," he says.

On the surface, the plan doesn't sound so special, says Doug Green, principal consultant with Bradam Group LLC.

"There is a long string of MSPP [multiservice provisioning platform] vendors who had integrated packet and DWDM for metro product, including Chromatis, Astral Point, Sycamore, Alidian, and a half dozen others," Green says. "All stated the integration of packet and DWDM as an advantage. All claimed some sort of optimization of wavelengths by intelligent muxing data traffic from multiple inputs."

Intellambda stands out from most MSPPs in that its ILS640 box ignores Sonet, going instead for IP deployments. The company might have some technology tricks it's not disclosing, too; otherwise, it doesn't stand much of a chance against competitors that could build something similar.

"I can get ten graduate students to glue together off the shelf components," Green says. "There has to be some intellectual property that gives them a competitive advantage, or they are toast. Larger vendors can always cut pricing on multi-box solutions while they crank out their own versions."

Even so, Intellambda has caught the eye of major carriers in Europe, Asia, and North America, Psutka claims. The company will have a cursory 10'x10' booth at Supercomm but plans to give private demos of its ILS640 system in a private suite about two miles from the show floor.

Psutka wouldn't say who founded Intellambda and won't reveal the number of employees, although he says the company is growing, populated in part by folks from Ciena Corp. (Nasdaq: CIEN), Fujitsu, and Nortel Networks Ltd. (NYSE/Toronto: NT).

— Craig Matsumoto, Senior Editor, Light Reading