Ethernet equipment

LR Names 2006 Leading Lights

SANTA BARBARA, Calif. — Glasses have clinked, steaks have been devoured, and brandy sipped. The third annual Leading Lights Awards Gala Dinner is over. Now we have to tell you what happened.

Hundreds of companies entered for this year's awards. Editors took months to go through them. Our shortlist of Leading Lights contenders was packed with many worthy entries, making it a struggle in many of the categories to pick out a single winner.

The selection process involved more than 20 editors and analysts from Light Reading and its leading market-research division, Heavy Reading. The winners were announced last night at our Gala Awards Dinner, part of Heavy Reading's two-day Links Executive Summit.

For a complete rundown of the shortlisted companies, please see LR Names Leading Lights Finalists.

Before we get to the winners, we should explain a little "twist" in the selection process. The judging panel decided to withhold the award for "Best Leadership, Public Company," because nobody seemed to stand out in the category.

The judging panel was prepared to give the award to Mark Wegleitner, CTO, Verizon Communications Inc. (NYSE: VZ), for his brave role in pushing forward his company's fiber-to-the-home intiative, one of the largest and most aggressive in the world. But, we were told by many "handlers" at Verizon (Mr. Wegleitner did not deign to speak with us) that Mr. Wegleitner didn't believe he was fit for the award. Now, that's definitely not leadership.

So we agreed.

But let's not spoil the party. That leaves 10 winners. Here they are:

  • Best Investment Potential (Long-Term), Public Company: Awarded to the company that represents the best long-term potential return on investment by virtue of solid management, product development, and market growth potential.

    Verizon Communications Inc. (NYSE: VZ)
    From a low of $30.00 at the end of 2005, Verizon's stock has recovered during 2006 to gain more than 20 percent, standing today at $36.15. But there's plenty of room left for growth as the carrier continues to report healthy profits and looks set to report annual EPS of $2.60 in 2007 despite its ongoing capex investment in its fiber access network. Its forward price/earnings ratio, based on the lastest analyst estimates is a modest 14, according to Capital IQ.

    In the ultra-competive services market, it's likely that those companies with superior financial strength, a diverse portfolio, and technical expertise will win. Verizon is one of the biggest in the biz, with $89 billion in revenue. Its portfolio stretches from wireless to enterprise wireline to fiber-to-the-home, covering all the communications angles.

    But Verizon offers investors more than "bigness." It also offers a generous dividend payout and plenty of cash. Verizon generates more than $20 billion in annual operating cashflow and pays investors a 4.5 percent annual dividend. It's as close as you can get to owning a bond in the stock market.

    Since the Democratic victory in the U.S. elections, there has been much handwringing about whether Congress will attempt to slow the resurging powers of the RBOCs. But for now, there's little to change the picture. Verizon will continue to be one of the dominant telecom services providers in the world.

  • Best New Product, Public Company: Awarded to the company that has developed a market-leading product that, through engineering and technical excellence, enables the deployment of profitable next-generation telecommunications services.

    Juniper Networks Inc. (NYSE: JNPR) MX960 Ethernet Switch
    This product emerged from what one could regard as "Ethernet envy." While competitors such as Alcatel (NYSE: ALA; Paris: CGEP:PA), Cisco Systems Inc. (Nasdaq: CSCO), and Force10 Networks Inc. were ramping up large Ethernet products geared for the carrier market, Juniper – gasp! – had apparently forgot to bring an Ethernet switch to its core market. Investors were getting angry at this gaping hole in the portfolio, and in the first half of 2006, Juniper was paying the price in the form of a punished stock valuation.

    The world waited. In October, Juniper finally unveiled a dedicated Ethernet switch, the MX960, with which it can now pitch against its main rivals to compete for a share of the IPTV infrastructure spoils. (See Juniper Antes Up on Ethernet (Finally).)

    The reception from analysts was generally positive, with Juniper ensuring the MX960 had some technical specs, such as its 480-Gbit/s capacity, that would raise the eyebrows and interest of carrier customers and competitors alike.

    So why did Juniper win? The judges felt Juniper's product made the biggest statement of the bunch – and was likely one of the year's most important announcements.

  • Best New Service, Public Company: Awarded to the service provider or carrier that has deployed a market-leading, revenue-generating service based on next-generation telecommunications technology.

    AT&T Inc. (NYSE: T) U-verse
    At a time when telecom service providers are becoming differentiated by their broadband video services, AT&T has stepped up to the plate with an IPTV service that includes high-definition TV; digital video recording (DVR) that allows customers to pause, replay, and record TV programs; and video-on-demand capabilities.

    And with the wrinkles ironed out, AT&T is all set to push out the service beyond its current San Antonio service area and take its IPTV revolution countrywide. (See AT&T Set to Expand Its U-verse.)

    U-verse is a clear example of what the major carriers need to be delivering if they're to remain relevant in a triple-play world. Judges liked it because it effectively combines all the links in the video tech chain: physical network, compression, software, set-top boxes, and content.

  • Best Marketing, Public Company: Awarded to the company that has best communicated a specific technology vision and/or business proposition to customers and investors, especially in cases where the company has defined and led the market.

    Cisco Systems Inc. (Nasdaq: CSCO)
    Cisco calls its new campaign to reach out to the consumer market its "Connected Life" campaign. But the best thing about this marketing idea is that it's connected to an actual business strategy.

    Last year, Cisco made one of the boldest acquisitions of the year, purchasing Scientific Atlanta – which earned it a Leading Light for Best M&A strategy in 2006. It has since turned this acquisition into a major turning point for the company, using the set-top box as the linchpin for many next-generation broadband services. In its fourth fiscal quarter of this year for example, Cisco shipped 1.44 million digital set-top boxes, a 33 percent increase in units shipped versus the same quarter of fiscal year 2006.

    Indeed, the message that Cisco is sending is that the integration of the consumer access network box into its portfolio will help move Cisco from a producer of corporate networking gear to a company that has direct acccess to consumers as well. It could be a signficant transformative moment for the company.
  • Best M&A Strategy, Public Company: Awarded to the company that has consistently demonstrated good timing, judgment, and execution in high-profile acquisitions.

    Level 3 Communications Inc. (NYSE: LVLT)
    Level 3 has taken the "eat or be eaten" approach to winning in the rapidly changing telecom services market. In the past year, it's undertaken a frenzy of acquisitions that have diversified its revenues and moved it beyond its traditional market of wholesaling into markets such as enterprise data services and Ethernet transport. (See Level 3 Buys Broadwing for $1.4B, Level 3 Takes TelCove, WilTel Sale Completed , Level 3 to Buy Progress, Level 3 Acquiring ICG, and Level 3 to Buy Looking Glass.)

    Indeed, the spending spree may not be over. (See Level 3 Still Hungry for Fiber.)

    Judges felt that two of its largest acquisitons – TelCove Inc. and Broadwing Corp. (Nasdaq: BWNG) – were among the boldest in the industry. In fact, the Broadwing deal looks the smartest, as analysts believe that the potential cost savings from the combination could put Level 3 back on the path to something unfamiliar to investors: profitability. (See YouTube Picks Level 3 and CacheLogic Uses Level 3.)

    Surviving the last few years in the IP wholesale market has not been easy, and Level 3 has recognized that it really only had one choice to survive – diversify away from wholesale into other markets and acquire more revenue. It's now done that, at an impressive level.

    To Page 2: Private Company Awards

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    LightWarrior 12/5/2012 | 3:34:37 AM
    re: LR Names 2006 Leading Lights I think you guys at LR/HR did a pretty good job at picking winners with one exception: Strix Systems Inc.

    The true measure of good marketing is how well known a company is (positioning is only as good as how effectively it resonates with the market, creates buzz, mystique, etc.). Unless I went asleep for 10 years and just woke up yesterday, I do not think Strix has past that test.

    I can think of 10 other private companies that have made bigger waves this year.
    Dredgie 12/5/2012 | 3:34:34 AM
    re: LR Names 2006 Leading Lights LR likes Nan Chen. CanGÇÖt complain about that, really. HeGÇÖs a nice guy.
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