November 29, 2001
For the past several months, the news in optical networking has been saddled with stories about layoffs, falling stock prices, and bankruptcies. The few good stories have came out of Asia, where experts believe near-term growth is still to be had.
Startup Appian Communications appears to confirm that belief, as it has announced a major win with NTT Corp., Japan’s largest carrier and one of the top five carriers in the world (see Appian Wins Big NTT Order).
NTT is the first and only major customer win Appian has announced to date. Few details about the contract are available. Appian officials are tight-lipped about where and how its gear will be used within NTT’s network. And they are even tighter when it comes to the actual figures involved.
“Let’s just say it is many, many, many millions of dollars,” says Mick Scully, president, CEO, and co-founder of Appian.
Appian sells a multiservice provisioning platform (MSPP), or a switch that sits in a carrier’s regional office to provide Ethernet voice and data services to subscribers over a Sonet or TDM infrastructure. Although he wouldn’t name names, Scully says that Appian beat out large equipment providers for the deal. Most likely these included Cisco Systems Inc. (Nasdaq: CSCO) and Nortel Networks Corp. (NYSE/Toronto: NT), which both sell next-generation Sonet equipment.
Mayan Networks Inc., another startup with a similar story of converging Ethernet, IP, TDM, and Sonet onto one platform, announced last spring that it had signed a deal with NTT (see Mayan Finds a Customer). But it turned out the deal was nothing more than a reseller agreement with no actual revenue attached to it. Mayan has since cancelled product development and filed for chapter 11 bankruptcy protection (see Mayan Down for the Count?).
Scully emphasizes that this is not an announcement of a future deployment; but, rather, the gear has already been shipped and Appian is recognizing revenue from it, something that can’t be said for a lot of startups in this economic climate. In March, Appian set up a distribution deal with Sumitomo Corp. in Japan, which Scully says was key to closing the NTT deal (see Appian Wins Big Japanese Deal). Scully says he expects other orders to follow.
This contract announcement is one of only a handful of deals that has been announced in the past few months between a startup and a major incumbent carrier, signaling that carriers may finally be ready to adopt next-generation optical technology into their networks.
Originally, startups looking to solve the metro bottleneck with Ethernet targeted new service providers like CLECs (competitive local exchange carriers). But many of these carriers ran out of money and went out of business, leaving startups with the incumbent carrier market, which has longer sales cycles and more stringent requirements. The sale can be further complicated by the fact that these carriers are also generally less willing to gamble on new technology.
”NTT is a huge company and a tier-one, worldwide carrier,” says Michael Howard, principal analyst and co-founder of Infonetics Research Inc. “It’s an absolute great win, not just for Appian, but for the whole sector.”
But does a small startup like Appian have the werewithal to follow through on the contract? Scully says the 118-person company is doing fine financially. He says they still have cash remaining from the $60 million third round it closed last December (see Banks Pile Into Appian). And with revenues now coming in, he says he doesn’t expect that the company will need to raise funds anytime soon.
“We’ll see what 2002 brings,” says Scully. “But at this point we aren’t looking for money, and what we have should take us through the mid-point of next year. The next round would go more towards building inventory and broadening our sales channels.” As for the future, he says that he and the other founders are in this for the long haul.
“The only way to build a company is for public exit,” he says. “You never know what will happen, but we didn’t build our business based on the idea of being acquired.”
— Marguerite Reardon, Senior Editor, Light Reading
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