Firstwave Follows the Feds
Today, startup Firstwave Secure Intelligent Optical Networks, Inc. came out of stealth mode and announced it has won a $29 million, five-year contract with the Naval Research Laboratory (NRL) headquartered in Washington, D.C. (see Firstwave Gets Naval Deal). Under the terms of the contract, Firstwave will expand the development of its CreaSION network management suite and its Secure Intelligent Optical Switches (SIOS) family of all-optical switches.
“Targeting the government has been a good play for us,” says John Taylor, chairman and chief executive officer of the company. “It’s the only piece of business out there with any credibility. And it has allowed us to learn by actually deploying our gear in a complex and highly respected network.”
The company, which was started in 2000 by two former Naval Research Laboratory scientists, has been testing its first generation of products in the Naval Research Labs since September of 2001. The gear has been deployed on the Advanced Technology Demonstration Network (ATDNet), an experimental research network connecting NRL with other U.S. Government agencies.
Few details are known about the company’s current products or plans for new ones developed under this contract. Taylor would only say that the new products include an all-optical wavelength switching platform, integrated with metro dense wave division multiplexing (DWDM) interfaces. He also says the key piece to the offering is the company’s network management suite, which allows for end-to-end wavelength management.
So far the company has only received funding from Raza Foundries, But Taylor would not disclose the amount.
While other optical startups like Corvis Corp. (Nasdaq: CORV) were having hot IPOs during the summer of 2000, Firstwave focused on its relationship with the Naval Research Laboratory (see Avici and Corvis Make Stunning Debuts). The strategy seems to have paid off so far.
Corvis’s stock closed at $83 per share on its first trading day two years ago, but today it's trading at around $0.65 per share. And now companies like Corvis and networking giant Cisco Systems Inc. are targeting government sales (see Is Uncle Sam an Optical Sugar Daddy? and Cisco's Rich Uncle).
Tellium Inc. (Nasdaq: TELM), another all-optical switching startup that went public last year, had abandoned its government roots in 2000 to focus on carrier sales (see Market Gives Tellium a High Five). But now the company is also trying to get back in the government game (see Tellium's Time Warp).
“This is a classic case of 20/20 hindsight,” says Simon Leopold, an analyst with Merrill Lynch & Co. Inc.. “In 2000, these guys probably looked like idiots for not going after carriers, but in this current environment it gives them an opportunity to make some sales.”
Still, the carrier market is where the big bucks are. With the Naval Research Laboratory contract under its belt, Taylor says the company now has the credibility to talk to carriers. Already the company has beefed up its carrier expertise with executives from companies like Lucent Technologies Inc. (NYSE: LU) and Sprint PCS (NYSE: PCS).
But Leopold points out that selling products developed for government agencies to carriers might not be as easy as Firstwave thinks. For example, the feds often require proprietary security implementations, but carriers require products that are standards-based.
It’s also hard not to notice that many companies developing all-optical switching have now shut down those operations. Lucent recently canned its LambdaRouter (see Lucent Terminates the LambdaRouter). Nortel Networks Corp. (NYSE/Toronto: NT) has stopped development of its Optera Connect PX product (see Nortel Shuts Optical Switch Effort). Tellium canned its MEMS team earlier this summer (see Dude, Where's My Carr?). And even Corvis, the biggest proponent of all-optical networks, has done little marketing of its solution. Ciena Corp. (Nasdaq: CIEN) hasn’t said much about its all-optical switch lately, either.
Calient Networks Inc. may be one of the only companies left still pushing all-optical switches. The company has announced one customer win in Japan (see Calient Captures a Contract).
Taylor says that these other companies simply built dumb optical crossconnects. Firstwave has focused on developing all-optical switches that make the network more flexible. Unlike Lucent’s LambdaRouter, which switches actual fibers, Firstwave’s gear switches wavelengths. The network management system, in conjunction with the switches, is able to change frequencies and manage wavelengths throughout the network.
“If they are the only game in town, they could do fine,” says Leopold. “But I tend to think that the market isn’t ready for this product category in general. And even when it is, it will probably be a niche application.”
— Marguerite Reardon, Senior Editor, Light Reading