Rumors are circulating on Yahoo today that Cisco Systems, Inc. http://www.cisco.com is negotiating the acquisition of another optical networking startup. The target is said to be Qeyton Systems AB http://www/qeyton.com, a Swedish venture developing metro DWDM (dense wave division multiplexing) equipment.

Claes Rickeby, Qeyton's CEO, declines to confirm or deny the rumors - which suggests there may be some substance in them. There's also some circumstantial evidence: Cisco staff have been spotted paying frequent visits to Qeyton's offices in Stockholm in recent days, according to people working in the vicinity.

Rickeby warns against reading too much into this activity. "We're building up relationships with different partners," he says. "We're meeting with people from a lot of companies."

At first glance, it's unclear why Cisco would want to buy Qeyton anyhow, bearing in mind that Cisco has already acquired the optical networking division of Italy's Pirelli, which has some pretty impressive DWDM gear.

However, it isn't that simple. Qeyton is playing in a different segment of the DWDM market - a segment where Cisco (via Pirelli) doesn't have an offering, and is currently reselling gear from another vendor.

Here's the score. The market for DWDM equipment really falls into four categories - long haul, metro core, access and enterprise.

The long haul market is already well established, and Cisco/Pirelli has a five percent share of it, according to Pioneer Consulting LLC http://www.pioneerconsulting.com.

The market for metro core equipment - linking together carrier's points of presence (POPs) with an optical backbone - has got off to a bumpy start. This is largely because vendors have tackled it by scaling down long-haul gear, and it's been too expensive.

In access networks (between POPs and customer sites) and enterprise markets (high bandwidth connections within data centers) Adva AG Optical Networking http://www.advaoptical.com has been almost the only player up until now. Its gear is being resold by Alcatel SA http://www.alcatel.com and also by Cisco according to some sources (Adva declines to confirm this).

Qeyton is targeting the same market as Adva, but with a more sophisticated solution. Specifically, Adva provides simple point-to-point connections, while Qeyton can offer a variety network topologies, including rings. The rings can be configured so that they serve multiple sites, with a box at each site splitting off a single wavelength for connecting customers.

Qeyton's technology also includes automatic re-routing of wavelengths, so that the traffic can be sent the other way around the ring if the fiber is cut or a box fails. The cut-over takes less than one millisecond, according to Rickeby. That's so fast that Sonet continues working without a hiccup, he adds.

Automatic re-routing has two big benefits. First, it makes it easy to extend rings to other sites, because the fiber can be cut and a new box can be installed without having to shut down the network. Second, it could be used to provide resilience in networks that run gigabit Ethernet directly over wavelengths, eliminating Sonet.

Both Adva and Qeyton are now adapting their technology for use in metro cores. They say they have a big advantage over vendors that have scaled down long haul DWDM gear, because their equipment has been designed from scratch to deliver low cost short hawl solutions.

Right now, Adva is a lot further ahead of Qeyton in terms of having a significant amount of its equipment already in use. But trials of Qeyton's gear are under way in Scandinavia and in the U.S., by a "well known ISP" according to Rickeby. He says the trials are going fantastically well - which might explain Cisco's interest.

by Peter Heywood, international editor, Light Reading http://www.lightreading.com