Supercomm Shocker

Supercomm Shocker – R. Scott Raynovich

June 6, 2003

4 Min Read
Supercomm Shocker

ATLANTA – Supercomm 2003 – Get this: Supercomm wasn't thoroughly depressing. If fact, following the funereal feel of OFC, it was downright upbeat.

Peek inside some of the booths of Passive Optical Networking (PON) companies at Supercomm 2003 and you were likely to see a gaggle of shocked and overwhelmed marketeers. Suddenly, their booth was buzzing with activity. Bell operating company engineers were hovering. The folks in the booths were glassy eyed.

You mean somebody may now actually want to buy the stuff? What do we do? What do we do!?

Yes, after getting some marketing play for the RBOCs, the PON folks were suddenly hot again (see RBOCs Hungry for Fiber and Fiber Access Plans Proliferate). They didn’t know how to handle it. After three years of plummeting confidence, the companies looked like awkward 16-year-old boys being propositioned by Heidi Klum.

This raises question about what’s happened to the technology cycle, and particularly, the startup cycle. Pre-bubble, if you were a startup, you raised a bunch of money, then hunkered down to develop product. If the product development went well and potential customers emerged after a few years, you raised some more money and looked to close the deals.

In the bubble years, the old rules got tossed out. Investors gave you gobs of money in the beginning with the expectation that within two years you’d develop the product, get customers, then be sold or IPO. Companies spent the money too fast. When the market suddenly dried up, investors panicked and either headed for the hills or hacked their companies into tiny life-rafts.

Now that the customers are finally perking up, it’s not clear which startups are prepared to respond, or what's even left of the last generation.

Let's take a company that's had its share of twists and turns, yet looks like it might survive: Quantum Bridge Communications Inc., a prominent PON supplier that once had triple-digit millions in cash, an army of hundreds of employees, and even an IPO filing. Years later, Quantum Bridge is a leaner and meaner company in the running for one of those big RBOC deals. Does it have enough people and enough money left for the end game? It might. But here is a company that was able to raise more than $100 million during the bubble years and still went through many rounds of layoffs (see Boston Area Startups Slash Jobs).

Not everybody was well positioned for the sudden PON perk-up. Some, like Optical Solutions Inc., didn’t even have a booth at Supercomm. Bad move. Try telling an RBOC you’re a legit equipment vendor when you can’t even pony up for a measly 10x10 on the show floow. Do BellSouth executives take meetings at the Super 8?

Such are the perils of “hibernation” mode, which strives to pare back staff, quiet down the marketing, and save every last penny. These days, it’s not uncommon to call a startup's switchboard and get nothing more than an automated directory and a general voicemail box that nobody answers. Some of these recumbent companies don’t even employ a dedicated marketing person.

Hibernation just doesn't work. Message to VCs with half-assed hibernating companies: Pay to play. If you’re not gonna play and the startup’s not a leader, take your company out behind the woodshed. We need to thin the herd anyway.

The remarkable thing about Supercomm 2003 is that we are only now beginning to see the fruits of the last startup cycle, which revved up in 1999 and 2000. Game-changing technology is becoming available after billions of dollars was pumped into hundreds of venture startups.

So what's to like? Access gear is yielding more bandwidth, combining voice, broadband, and video technologies (see Telcos Tackle Triple Play ). Chips are integrating multiple functions of the network, bringing down the costs of line cards (see PMC, TranSwitch Get Edgy, Agere Launches Line-Card Kits). There are new flavors of DSL that yield up to 70 Mbit/s of bandwidth. The plummeting price of optical components is bringing them to the brink of mass production. Multiservice edge gear is hot, as the largest carriers in the world telegraph big plans to migrate to packetized cores (see TiMetra Shoots for Service Edge, Tellabs Builds on 5500 Legacy), Research: Metro Optical Peps Up). Ethernet services are gaining the attention of the big carriers (see Carriers Converge on Ethernet, Metro Ethernet Showcased in Demo, and Masergy Launches VPLS Service). Even VOIP, the Black Sheep of carrier technology, is beginning to go mainstream (see MCI Vouches for Nortel's VOIP and Cisco Gets Fat on Proprietary VOIP).

While the Nasdaq was plummeting and Worldcom imploded, everybody was focused on the plight of their stock options. Meanwhile, technology developments were still marching forward. So now the market is coming back. Can the startups come back?

— R. Scott Raynovich, US Editor, Light Reading

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