Ellacoya Stands Alone

Even as Cisco Systems Inc. (Nasdaq: CSCO) appears to be readying a play for the traffic management space, Ellacoya Networks Inc. seems braced to go on its own.

Today, Ellacoya expects to announce a $7 million funding round intended to take the company to positive cash flow next year, according to chairman Gerald Wesel. The new funding will go towards adding staff to Ellacoya's roster of 60 (see Ellacoya Snares $7M).

Ellacoya has raised more than $100 million in five years and five funding rounds, including today's. But the company went through a post-bubble overhaul along the way; since then, it's raised $21 million in two rounds (see Is Ellacoya on the Comeback Trail?). The latest $7 million is coming from prior investors Atlas Venture, Flagship Ventures, and Lightspeed Venture Partners.

Ellacoya and P-Cube Inc. have been in the spotlight lately for their work in traffic management, shipping appliances that examine traffic patterns and allow carriers to identify bandwidth-greedy applications (see P-Cube Tiptoes Into the Top Ten). In particular, the companies boast of being able to detect peer-to-peer traffic, which has been consuming more than its share of bandwidth on some networks.

The big question is whether Ellacoya will have to counter Cisco's acquisition of P-Cube (see Cisco Plucks P-Cube for $200M). At the least, Ellacoya has started thinking about it. "We have several partnerships in development right now," Wesel says, although he won't divulge any details. "Integration makes the product even more compelling."

Cisco hasn't outlined its plans in detail, but it appears to be amassing an entire ecosystem around traffic management. In addition to P-Cube, Cisco acquired Parc Technologies Inc. and has invested in Corvil Ltd. Those startups offer optimization and planning software to complement what P-Cube does (see Cisco's Parc Purchase: An MPLS Play and Corvil: Another Cisco Secret?).

In a similar vein, CacheLogic Ltd., a potential P-Cube/Ellacoya competitor, has teamed up with routing vendor Caspian Networks Inc. and Shenick Software Systems Ltd. (see Caspian Adds P2P Punch).

Ellacoya shouldn't feel any pressure to partner up, says Frank Dzubeck, president of Communications Network Architects. From his point of view, Cisco's purchase of P-Cube was more pragmatic than visionary.

Dzubeck says P-Cube had made a business out of following Cisco routers around, fixing bandwidth congestion for service providers such as Australia's Telstra Corp. "Telstra jumped on P-Cube and put them behind every one of their [Cisco] 12000s," Dzubeck says. "The logical buyer [for P-Cube] was already Cisco, because Cisco saw these guys picking up the business after they failed."

Ellacoya might have ambitions to become more of a powerhouse, but if that doesn't come around, Dzubeck thinks the company has a good thing going in cable, where operators use Ellacoya to pinpoint users whose bandwidth use overwhelms cable's shared connection. "They found a terrific niche in the cable industry," Dzubeck says. "P-Cube said they could do the same thing and compete, but Ellacoya's box is cheaper, because they focused and made it a niche play."

— Craig Matsumoto, Senior Editor, Light Reading

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firstmile 12/5/2012 | 1:15:45 AM
re: Ellacoya Stands Alone If nothing else, Ellacoya should receive the survivor island award...these guys have been at it forever without any major breaks...
voip_guy 12/5/2012 | 1:11:11 AM
re: Ellacoya Stands Alone As an exAcoyan, I can tell you they have acheived some measure of success. They have won a lot of business that cannot be splattered in the press. Most MSO's looking to monitor or control bandwidth usage would rather not risk bad publicity.
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