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Ethernet Monday: ADVA, WWP, and More

Light Reading
News Analysis
Light Reading
7/26/2004

Several Ethernet equipment companies have faced the day with much more positive attitudes than, say, Bob Geldof.

Off the back of a report that shows enterprise users are just gagging for Ethernet services, a bustling gang of vendors came out vying for the industry's attention (see Enterprises: We Want Our Ethernet!).

  • ADVA AG Optical Networking (Frankfurt: ADAG.F) acquired total ownership of Metro Packet Systems Inc. (no Website), a small Ethernet access technology startup. In a stock deal worth €4.1 million ($5 million), ADVA bought the 70 percent of the company it didn't already control (see ADVA Buys Ethernet Start-Up).

    ADVA already owned 30 percent of the nine-person outfit, following a seed investment of €416,000 ($505,000) last September. Since then Metro Packet Systems (MPS) has been developing the Layer 2 and Layer 3 components of ADVA's FSP 150 Ethernet access products, which were launched earlier this year (see ADVA Launches Ethernet Access Products).

    Brian McCann, ADVA's chief marketing and strategy officer, says that initial investment gave ADVA the exclusive rights to the technology MPS was developing, and also gave it first dibs on buying the company outright. Which it has now done, in a deal that values the company at €5.86 million ($7.1 million), compared with a valuation of €1.4 million ($1.7 million) last September.

    So why make the move now, and why the hike in valuation? McCann says the company has evolved from concept to product in the past ten months, "and has executed very well to plan. It has met all the timeframes, performed very well, and worked well with the ADVA team. We acquired MPS now to protect our investment, develop the technology, and grow the team."

    Besides, adds McCann, "We can afford it. We're doing very well." Indeed, ADVA has more than kept its ship afloat during the downturn (see ADVA Reports Improved Results, Who's Winning in the Rebound? , and ADVA Grows, Says It's Organic ).

    So what, or rather who, has the vendor bought? McCann says all nine of the MPS staff are engineers, and that ADVA had been handling the startup's business support functions, such as HR, since its investment last September.

    And if certain unspecified sales targets of products based on MPS technology are met in 2005, the MPS Nine (as they're now known) are due a shared cash bonus of up to €4.5 million.

    So where did nonet come from? Well, it seems they're the crack core engineering team from failed Swedish Ethernet access player Dynarc, which closed its doors in 2002 (see Dynarc Files for Bankruptcy, Startups Stumble and Succumb and Dynarc in Trouble).

    McCann says MPS was formed by ex-Dynarc executive and former ADVA technical strategy team member Lars Ramfelt, who "took the best of Dynarc's Stockholm team" to create the new company.

    That history might force potential FSP 150 customers to double-check the new access gear. At least one service provider had major problems with Dynarc equipment, saying: "The bloody Dynarc things didn't work properly. We couldn't bill anyone" (see PacketFront: Too Good to be True?).

    As for the FSP range, McCann says it's just becoming generally available, and no customers have yet been announced, though BT Group plc (NYSE: BTY; London: BTA) has made plenty of encouraging sounds (see ADVA Launches FSP 150).

    McCann says developing an Ethernet access business is one of ADVA's three key strategic goals, and this acquisition is a major step towards building that business. Another goal is to build up the company's North American business, and to help do that, ADVA CEO Brian Protiva will relocate to New York during the current quarter, and Ramfelt will report direct to him.

    ADVA announces its second-quarter results this Thursday. Today its share price fell €0.15, about 3 percent, to €4.50.

    In other news...

  • Ethernet-in-the-First-Mile (EFM) was a hot topic today, as Nayna Networks Inc. unveiled three new switches and Actelis Networks Inc. announced that it has 25 systems based on the Institute of Electrical and Electronics Engineers Inc. (IEEE) standard for EFM already in operation (see Nayna Offers EFMA Gear for FTTP and Actelis Blazes Ethernet Access Trail).

    The new gear is part of Nayna's new focus on Ethernet access, after it abandoned the world of all-optical switching (see Nayna Adds to EFM Line and Nayna Jumps Into PON).

    Actelis has notched up success with its Ethernet-over-copper systems on both sides of the Atlantic in the past few months (see German Utility Picks Actelis and Actelis Wins Midwest Contract). It also bolstered its management team by naming industry veteran Rich Yonker as its CFO, to cope with the influx of cash (see Actelis Names CFO). Surely it must be lucky to have a CFO named Rich?

  • World Wide Packets Inc. announced that its LightningEdge products had made their way into the municipal FTTP network in Provo, Utah (see Provo Uses WWP for FTTP ).

    WWP has had a busy few months launching new products, winning deals in the U.K., and landing more backing (see MPLS Arrives in Access Nets, WWP Intros New Access Gear, WWP Scores With Brits, and World Wide Packets Tops Up Tank).

    — Ray Le Maistre, International News Editor, Light Reading

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