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Optical/IP

CoSine Unveils Next-Gen Silicon

IP service switch maker CoSine Communications Inc. (Nasdaq: COSN) announced its second generation of silicon today. The company, which has been struggling to generate revenue, says the new chipset will expand its addressable market and help get it on the road to profitability (see CoSine Combines Wireless & DSL ).

The IPSG+ chipset offers a 20 percent increase in performance and a 50 percent increase in capacity, according to David Messina, vice president of marketing for the company. The new features and functionality will allow CoSine's IPSX 3500 and 9500 IP service switches to provide wireless customers with secure and fast VPN services. They also enhance the DSL aggregation capabilities of CoSine's gear, greatly reducing the cost per subscriber, says Messina.

These are much-needed selling points. “Wireless VPNs and DSL aggregation both represent higher-volume sales opportunities, which is exactly what CoSine needs,” says Mark Bieberich, an analyst with Yankee Group. “In terms of scaleability of L2TP and PPP terminations, and cost per subscriber, they match up well against alternatives from Cisco, Juniper, and Redback.”

Let's get specific. First, for wireless LANs, CoSine has added mechanisms to its chipset that improve performance, such as support for more IP addresses, added security for connections, and enhanced compression techniques.

With respect to the IP address scaling issues, CoSine has improved the interworking between IPSec encryption and Network Address Translation (NAT) in its gear. Since NAT doesn’t work when packets are encrypted, CoSine has encapsulated the encrypted traffic so that NAT is able to be used. The result is that more secure connections can be handled by the service switches. CoSine also says it has improved the performance of wireless access by 50 percent by offering compression on IPSec traffic.

These enhancements are needed by mobile operators to extend services based on wireless LAN gear, a market CoSine's eager to address more effectively. According to Gartner/Dataquest there were about 25 million wireless Internet devices in use in 2002. That number is expected to grow to over 80 million by 2006. Wireless LAN coverage also is growing: Gartner estimates that there were fewer than 10 million hotspots (areas of live coverage) worldwide in 2002, and it projects there will be close to 120 million by 2007.

CoSine’s new chipset is also designed to improve the IPSG 9500’s ability to be used for DSL aggregation, says Messina. Specifically, its increased performance will allow it to offer Layer 2 tunneling at higher speeds, letting carriers use the Layer 2 Tunneling Protocol (L2TP) in larger networks without requiring them to buy additional gear.

Messina says it's a big differentiator for CoSine to support the security improvements and DSL aggregation in its chipset. The combination can reduce the cost per subscriber by at least 50 percent, he claims. In contrast, he argues, solutions from Cisco Systems Inc. (Nasdaq: CSCO) and Juniper Networks Inc. (Nasdaq: JNPR) are unable to run these functions simultaneously, forcing carriers to deploy two boxes, one for DSL aggregation and the other for VPNs.

Interestingly, though CoSine claims to distinguish itself from Cisco and Juniper, Messina insists its products do not directly compete with edge routers from competitors like these two. Messina also objects to being classified as a broadband aggregation device or broadband remote access server (B-RAS) vendor, à la Laurel Networks Inc. or Redback Networks Inc. (Nasdaq: RBAK). But experts beg to differ.

“It’s just IP snobbery,” says Graham Beniston, principal at Beniston Broadband Consulting and presenter of a recent Light Reading Webinar, titled "Next Gen B-RAS: The Money Makers" (Click on this link to see the archive). "They should loosen up," says Beniston. "The fact is that they came out very well in the comparison. Their IP services are very good, but they also have much more than that and shouldn’t shy away from wider product definitions.”

In a recent report for Light Reading Insider, to be published later this month, Beniston compares B-RAS offerings from Cisco, CoSine, Juniper, Network Equipment Technologies Inc. (net.com) (NYSE: NWK), Nortel Networks Corp. (NYSE/Toronto: NT), and Redback Networks Inc. (Nasdaq: RBAK). He calls the IPSX 9500 “the gorilla of B-RASs, from its weight and power consumption to its session density and tunnel capacity.” He even goes so far as to say that it "should be on every carrier’s shortlist of top range B-RAS.”

At some point, CoSine may be glad to stand up and be counted by any name. Its biggest obstacle has been weak sales. For the first quarter of 2002, the company only reported $2.2 million in revenues (see CoSine Investors Lash Out). To break even and start making a profit, CoSine needs to generate about $20 million per quarter.

Not an easy goal. Indeed, investors are frustrated; and one large shareholder, Mellon HBV Alternative Strategies LLC, has launched a campaign to liquidate the company’s assets and deliver the cash to company shareholders (see Mellon Pressures CoSine for Sale and CoSine: Not Ready to Sell).

But customers seem intrigued and enthusiastic about the new product developments.

“We really like the IPSec compression features and the integrated remote access piece,” says Barry Tishgart, director of product management for Sprint Corp. (NYSE: FON). “We have a number of customers that could take advantage of these features, and they could help us differentiate our dial-up and DSL offerings.”

As for CoSine’s financial woes, Tishgart says Sprint is keeping an eye on the company’s overall progress.

“We have pretty frequent high-level interaction with the company’s executives,” he adds. “And we feel comfortable that there is a plan to continually enhance the product and that it will be supported by a viable and profitable company.”

— Marguerite Reardon, Senior Editor, Light Reading

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