Light Reading's Top Ten Private Companies 602400

Top 10 Private Companies

May 12, 2004

6 Min Read
Light Reading's Top Ten Private Companies

Coming up with a Top Ten Private Companies list these days is about as easy as naming the Ten Most Popular Personal Injury Lawyers.

The odds are long that a telecom equipment company can take $100 million or so in venture funding, turn it into a solid, bug-free product, and sell it to large incumbent carriers in great enough quantities to generate a return on investment (i.e., at least two or three times the capital put into the company).

To adjust for the times, we've tried to lock in some more reasonable criteria (revenues? functional product?), expand the envelope of the Top Ten Privates list (niche markets, overseas), and generally look for – well – success.

Needless to say, the previous group has taken a pretty uniform beating (see Light Reading's Top Ten Private Companies). We stuck with the tunable laser companies far too long, but they have now been purged: So long, Agility and Iolon! Ample Communications' rewards have been less than ample. Tropic Networks may be going south if it can't nail down an RBOC deal soon. Velio Communications was actually sold, so it's moved to the Liquidity Bin, although – truth to tell – that deal was less of a liquidity event than a semi-moist one (see LSI Snares Velio). And Atrica? Schmatrica! And yet, going over some of the choices saddens us. It's clear that somebody must have had a bad pint at Supercomm 2002 (see Polaris).

But hey, we're doing better than your average VC, which bats around .100. According to the somewhat suspect calculations put together by the monkeys in Light Reading's Statistics Cellar, we're batting close to .280. Derek Jeter, eat your heart out! And despite the scarcity of “home-run” events on our list (let's face it, there have been vitually no home runs in this environment), there have been some modest liquidity events in the past 12 months (ka-ching!).

WaveSmith, which once occupied the No. 3 spot, was acquired last year by Ciena Corp. Once WaveSmith was taken out, we replaced it on the list last July with Catena (see Catena Earns Top Ten Spot and Catena Networks). Ciena proceeded to scarf it up as well. Funny how Ciena locks onto that No. 3 spot, eh? Next time maybe we should put a company in there that could help Ciena's stock price. Maybe Microsoft?

For those wondering what happened to the long-time No. 1, Laurel Networks Inc., we just got tired of waiting. Laurel's been on the list for about two years and seems to have trouble getting the big deal done. Its one OEM deal with – who else? – Ciena ain't that impressive (see Ciena Takes Stake in Laurel). In fact, it's gone nowhere. Hopefully the new CEO, Don Pyle, who seems solid, can inject some life into the company (see Laurel Hires New CEO). We still like the product and the company, but we've become impatient and thought it was time to give somebody else a shot.NetScaler), merchant-silicon chips (Wintegra), and PBX replacement (Sylantro). Not sure Ciena would want to buy all three – they may draw the line at the PBX replacement market.

In security, we've got NetScaler, which makes a dandy box for managing VPNs and other applications in the data center. We also looked for a more global twist: Huawei is becoming a bigger global player, regardless of what some of the more enlightened posters on the Light Reading message boards say about the Chinese. The bottom line: Huawei is winning deals from Europe to Asia, and if business begins to boom, expect it to consider a possible listing on a U.S market in 2004. Our selection of other picks relied heavily on whether we could verify that there are actually revenues attached to each company. For example, Force10 is said to be shipping substantial product out the door (in exchange for real live moolah), and Movaz's existing stream of revenue should be boosted by a reseller deal with Lucent. Wintegra is close to breaking even, say our sources, and might take advantage of the mini-boom in programmable chips to file for an IPO if the tech markets cooperate. [Ed. note: If only it didn't sound like a mouthwash...]



Of course, there’s still plenty of fodder for the skeptics: We've granted Calix, which has been on the list for a long time, a stay of execution based on some recent progress in the customer department. But they'd better start delivering some big numbers for the pay off or they won't make the next list.

Infinera is high concept and certainly the most risky of our choices, but we'll bet the jockey on that one. Sylantro's our one requisite VOIP play.

You may click on the links in Table 1 below for full coverage of our picks.

Table 1: Top Ten Private Companies



Table 2: Liquidity Bin

Name

Last Position on List

Unisphere

1

Tellium

2

Cyras

6

WaveSmith

3

Catena

3

Velio

7

Telica

10





— The Staff, Light Reading

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