Optical/IP Networks

Exalt Beams Up Microwaves

Microwave veterans from Western Multiplex Corp. (Nasdaq: WMUX) have launched a startup that purports to outdo the giants in wireless backhaul.

Exalt Communications Inc. , founded in 2004, is hoping that the increased bandwidth needs of data services and 3G wireless will outpace the backhaul equipment that's in place.

Founder and CEO Amir Zoufonoun thinks he can do this because he's drawn a team from Western Multiplex that he says built four generations of this kind of equipment. For Exalt's gear, the team designed their own chips, figuring off-the-shelf parts would be too expensive and wouldn't match the performance they wanted.

The company employs 50 and works from an office in an older, less-than-glamorous part of town. (See Backroads.) But Exalt is gaining popularity among would-be investors, now that backhaul is a hot topic.

"When we started, backhaul was definitely out of favor. Most VCs wouldn't even give us an appointment. Now, the pendulum has swung completely the other way," Zoufonoun says. "Every major carrier has been outspoken about backhaul being their pain point."

The result is a line of microwave radios and Ethernet bridges that Zoufonoun says is better suited than incumbents' equipment for the upcoming 100-Mbit/s generation of backhaul. Exalt designed the boxes to be as flexible as possible -- Zoufonoun says the gear can operate indoors or outdoors, covering different wireless bands, providing T1/E1 or Ethernet connectivity.

Exalt's strength has been its team, which is already familiar with the market and has connections at big carriers. To that end, the company has done little publicity; although products have been shipping since 2006, Exalt is only now readying its first-ever press release, probably for publication this week, Zoufonoun says.

The team managed to get a product built so quickly because of its experience, according to Zoufonoun. And the CEO has used his 13 years at Western Heritage to get a foot in the door with carriers big and small.

Exalt certainly needs the boost, because big companies rule the microwave market. Ericsson AB (Nasdaq: ERIC) is the leader, and other competitors include Alcatel-Lucent (NYSE: ALU), Motorola Inc. (NYSE: MOT), NEC Corp. (Tokyo: 6701), and Nokia Networks .

But the activity in backhaul has brought on some smaller players such as Ceragon Networks Ltd. (Nasdaq: CRNT), DragonWave Inc. (AIM/Toronto: DWI; Nasdaq: DRWI), and Nera Networks AS .

And last year, Harris Corp. (NYSE: HRS) bought Stratex Networks for $600 million last year, creating Harris Stratex Networks Inc. (Nasdaq: HSTX).

Zoufonoun says he didn't found Exalt just to flip it in a quick acquisition. Whether the offers even start coming in will depend, in part, on how much of a leapfrog Exalt's technology represents.

"Once they get some market traction, someone could buy them," says Michael Howard, analyst at Infonetics Research Inc. "The challenge is to get some market share."

Zoufonoun had been considering Web 2.0 and other tech angles after taking a year off from Western. In the end, though, he decided wireless backhaul was due for an overhaul, considering the bandwidth soon to arrive from data networks.

"When I looked at the incumbents that I had known for years, they were not doing the right thing for where the market was going," he says.

He might have a point. Recent Unstrung Insider reports have noted that 2G backhaul equipment might not be suitable for future data services -- Ethernet microwave is even being considered for delivering high-speed access services. (See Insider: The Backhaul Question and Ethernet Boosts Microwave Market.)

Exalt kept pretty quiet the whole time. It's raised two funding rounds, with ComVentures and Trinity Ventures contributing to each. Zoufonoun confirms Exalt has raised less than $25 million but won't give a specific amount.

— Craig Zoufomoto, West Coast Editor, Light Reading

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