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June 5, 2001
ATLANTA -- Supercomm 2001 -- CoSine Communications Inc. (Nasdaq: COSN) has announced a new IPSX 9500 IP service switch at the Supercomm 2001 tradeshow (see CoSine Intros New Services Platform). The switch, which is designed to use new scalable line cards, essentially replaces its original product, the IPSX 9000.
“This is a logical progression in the design of our product,” says David Messina, director of product marketing for CoSine. “There are about 100 IPSX 9000’s out there, and we’ll continue to service them. But most of our new customers will probably go with the IPSX 9500.”
The IPSX 9500 is based on a completely new architecture that distributes processing functionality and switch fabric capacity on different line cards. It also allows the product to create virtual private networking (VPN) tunnels at full wire rate, and it will offer a denser configuration with almost 30 times more capacity per chassis. It’s this new architecture that could finally give service providers a reason to actually buy a CoSine product, says Michael Kennedy, a managing partner with Network Strategy Partners LLC. “They are establishing a good starting point for carriers,” says Kennedy. “It’s smart for them to lower the initial cost and allow service providers to buy the capacity incrementally.”
The carrier capital spending crunch has hit CoSine particularly hard. The company has seen a tremendous slowdown in its sales. According to an Infonetics Research Inc. report issued last month, the company’s market share was cut in half in the first quarter of 2001 (see Edge Router Market in Chaos). It went from holding 6 percent market share in Q4 2000 to 3 percent share in Q1 2001. CoSine wasn’t the only company hit. Other companies also selling IP service switches, like Nortel Networks Corp. (NYSE/Toronto: NT), Lucent Technologies Inc. (NYSE: LU), and Cisco Systems Inc. (Nasdaq: CSCO), also saw their revenues decline in the first quarter of this year. And Nortel and Lucent also lost market share.
“We’ve been affected by the slowdown,” says CoSine’s Messina. “You can look at our revenue and see that. But we haven’t seen a decline in interest. Service providers are just being more careful with their money and are taking longer to decide.”
While these figures could be interpreted to mean that service providers aren’t terribly interested in service creation platforms, analysts say that would not be entirely accurate. The problem CoSine faces is that it's been offering service providers a flawed proposition. It allows them to offer VPN and firewall services that may be sold to customers. But the current product, the IPSX 9000 is too big and its intial cost is too high for carriers to buy right now. What’s more, with a total capacity of only 22 Gbit/s, it doesn’t scale well, says Kennedy.
But the new IPSX 9500 is more modular and is designed to allow service providers to gradually add line cards as they need them. This could help entice service providers to enter the market at a lower cost and allow them to scale up to 614.4 Gbit/s in a fully loaded 12-slot chassis.
“What they’re doing makes sense,” says Kennedy. “But it’s been frustrating that they haven’t been able to build the market for it yet. This announcement shows that they are starting to address those issues of why not to buy their product.”
- Marguerite Reardon, Senior Editor, Light Reading
For more information on Supercomm 2001, please visit the Light Reading Supercomm 2001 Site.
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