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Native Secures Its Survival

Startup Native Networks Ltd. has clinched an OEM agreement that will “take it though the telecom winter and into the telecom spring” according to Steve Harbour, until recently the startup’s CEO.

The deal is almost certainly with Alcatel SA (NYSE: ALA; Paris: CGEP:PA) -- although neither Harbour nor Alcatel would confirm this. "We never comment on rumors and speculation," says an Alcatel spokesman.

Native Networks makes equipment that enables carriers to offer what looks like Ethernet-based services to corporate customers over their existing Sonet (Synchronous Optical NETwork) and SDH (Synchronous Digital Hierarchy) infrastructures. In other words, it'll enable Alcatel to offer "Next-Gen Sonet" technologies that promise to make circuit-centric carrier networks more data friendly (see Next-Gen Sonet and Next-Gen Sonet Silicon).

The supposed deal with Alcatel demonstrates a shift in strategy by Native. It's given up trying to sell directly to service providers and is instead focusing on reaching big carriers through OEM deals and smaller carriers through resellers (see, for example, Native Gets UK Reseller).

"This sort of deal represents the future for all startups," comments Bert Whyte, director, president, and CEO at Network Equipment Technologies Inc. (net.com) (NYSE: NWK), a service creation vendor. "Service providers won't go nutty again [and buy directly from startups]. Those days are gone forever. The only path to the big accounts for the startups is now through the incumbent equipment vendors' sales channels."

This also appears to be behind Harbour's departure two weeks ago, which was "amicable," according to Harbour himself, as well as Steve McCaffery, Native's VP of sales. However, the departure sounds rather hasty for that to be true. Harbour left before a replacement had been found. The company has launched a search and is currently being run by a committee of McCaffery in the U.K. and Gilad Goren and Eraz Aviv in Israel. Goren is a founder and president. Aviv is a newcomer with production experience, filling the COO role.

"I've done my bit. I've accelerated the business -- and now I'm available for work from September," Harbour told Light Reading today. "Right now, I'm trying to persuade my wife to go with me on a Harley Davidson from Chicago to Los Angeles."

— Peter Heywood, Founding Editor, Light Reading
http://www.lightreading.com Want to know more? The big cheeses of the optical networking industry will be discussing this very topic at Opticon 2002, Light Reading’s annual conference, being held in San Jose, California, August 19-22. Check it out at Opticon 2002.

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lilgatsby 12/4/2012 | 10:08:45 PM
re: Native Secures Its Survival Good news is needed in a bad way. There are still some big players that need to get by the "guilty until proven innocent" stigma that telcom is getting labelled under before this thing can fully turn-around. It is more than customer wins and debt deals, it is rebuilding perception and public trust.

On another note: Do you have any insight into Touch America? I saw they are being sued for "poor" guidance among other things. I'm curious how this effects their ongoing suits with Qwest? Might be a good article...hint, hint.

lg
Steve Saunders 12/4/2012 | 10:08:45 PM
re: Native Secures Its Survival Is it just me, or has there been an increasing amount of good telecom news recently?

A whole bunch of contract wins were announced last week (Colt/Cisco, Alcatel/Telmex, Terabeam/DOD, Lucent/Irish PTT, Optical Solutions and somebody, RAD and somebody else).

Now Buffett jumps into Level3, then this?

Is this the start of an upswing in telecom?
realdeal 12/4/2012 | 10:08:44 PM
re: Native Secures Its Survival Steve,

I don't want to rain on the parade, but it is more like the calm before the storm rather than an up-swing in the sector.

We are going to see most, if not all, private high tech telecom, storage, wireless and semiconductor companies go under.

Some of the big guys will start to cut entire projects, leading to massive layoff's. While they are doing this, they will pick up some of the private companies just prior to a chapter 11 filing for pennies on the dollar.

This will lead to a serious hit on the salary front for high tech workers. VC's simply will not pump money into a new venture when they know ahead of time the return on investment will not be there. Since they are clever people (I'm assuming) they will pump money in and either limit how much they will give, leaving the company to either hire fewer people and make them work longer hours, or hire more people and pay them 25-50% less money.

This trend will continue for the next 2-3 years and I'm not saying it will rebound then- because it may not.
topper 12/4/2012 | 10:08:44 PM
re: Native Secures Its Survival Are "good" and "start" just meaningful relative to "bad" and "more of the same"? What seems significant to me is that we have visibility of the winners and the losers. Take a look at the following news wire article.

"STOCKHOLM -- Telia International Carrier (Telia IC) has strengthened its position in France and Italy by expanding its fully owned Viking Network through the purchase of assets of a French subsidiary of KPNQwest."

The winners here are the Telia investors that have bought a long-term asset for pennies on the dollar while the losers are the KNPQwest investors.

From this transaction we can see that, in general, the financially strong players will squeeze the weak players in many segments; carriers, equipment vendors, banks, VC's and even Warren Buffet.

To me separating winners and losers, means visibility, means more realistic plans, means more decisions, means progress, which is a "good start" on recovery. However, I expect to see more bad news come out which will be a signal to some that the recovery has not yet begun.
realdeal 12/4/2012 | 10:08:43 PM
re: Native Secures Its Survival LG-

My post was not intended to offend anyone. I did not slam people or companies, but rather gave an accurate picture of what's to come.

Unfortunately I can't control what happens and I don't sign VC checks, audit RBOC's books or issue purchase orders- so my insight means next to nothing but I am entitled to my opinion based on my knowledge of the high tech sector.

Quit crossing you fingers and whispering "there is no place like home(Dorothy)" to yourself and your loved ones. It is what it is and it will stay this way for quite some time.

The Jackass comment- now that was not necessary- now I have to explain to my 4 year old daughter (who reads all of my posts) that there are just some people in this world who like to go around hurting people they don't know simply because they don't like the way they dress, what they have to say, what religion they subscribe to....

I know, rant, rant, rant- sorry.
switchrus 12/4/2012 | 10:08:43 PM
re: Native Secures Its Survival "Is it just me, or has there been an increasing amount of good telecom news recently?


Now Buffett jumps into Level3, then this?

Is this the start of an upswing in telecom?"

After every drought, the first sign of rain is welcome. Is this just a freak storm or is it a return to something approaching normal, think pre bubble.

IMHO due to the cuts in spending there will be a bit of a bow-wave effect when building begins again, I think we are seeing the beginnings of a few companies looking down the road +1 year and seeing demand. The well run companies will try to get in line to get equipment on order, their analysis will prove or disprove how much needs to be spent.
twistedcopper 12/4/2012 | 10:08:42 PM
re: Native Secures Its Survival didn't ALA buy astral point for this purpose?
-twisted
lilgatsby 12/4/2012 | 10:08:41 PM
re: Native Secures Its Survival r-deal,

Whatever you say, sport. Sounds like you have this thing all figured out, good for you.

lg
stuartb 12/4/2012 | 10:08:41 PM
re: Native Secures Its Survival Native's is not a NG-SONET product. Like Appian and Coriolis, they offer an Ethernet switching box that is specialized to provide EoS (Ethernet over SONET or over SDH). Native is complementary to the Astral point NG-SONET product (a hybrid ADM and 3/3 DCS) which does not do any Ethernet switching.

-Stu
Bumper_car 12/4/2012 | 10:08:27 PM
re: Native Secures Its Survival Does anyone know what a "virtual ethernet network" is? I have been out to the Native Networks web site to find out what their technology is. All I could find was some major hype about Ethernet. Can anyone tell what it is that they are talking about or it is just another piece of marketing hype that was "bought" by a major vendor?

Real questions:
What is a "Virtual Ethernet Network"? Is it X.86? Is it GFP? Is it MPLS? Is it DWDM? Is it packet encryption? Is it RPR? Is it anything more than a VPN under a different marketing name? Does it keep the Ethernet frame intact or does it strip part of it off like the IETF Martini draft proposes? Does it provide seperate "circuits" for each customer like "private line" or does it put all of the different customers' traffic in the same circuit like other "packet" services? How does it segregate/insulate one customer's traffic from another? How does it provide security in a world of hackers that can get into just about anything except private line circuits? How does it provide Ethernet characteristic performance, no data loss, low latency, low or no latency varience? Does it require that the customer run IP over the Ethernet, or can they run something like AppleTalk, IPX or SNA? Is it interoperable with anyone else's technology? Does it need to?
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