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Optical/IP

Firstwave Follows the Feds

The vision of an all-optical network has not yet been lost. While carriers continue to tighten their belts, Uncle Sam is dishing out cash to help startups develop new all-optical switching technology.

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
http://www.lightreading.com
BobbyMax 12/4/2012 | 9:54:33 PM
re: Firstwave Follows the Feds It is very intriguing that the Federal Government would award $29 million contract without RFP and competitive bidding. There are a lot of companies that can provide end-to-end network management and protection and restoration mechanism, etc on a equally competitive price.

It is a very disturbing trend indeed.
daboyz 12/4/2012 | 9:54:27 PM
re: Firstwave Follows the Feds That is the first I have heard of Firstwave, but it seems they have done a lot since 2000 when they were founded....no? Doesn't the contract bode well for them in these tough times?
gardner 12/4/2012 | 9:54:27 PM
re: Firstwave Follows the Feds
It is very intriguing that the Federal Government would award $29 million contract without RFP and competitive bidding.
. . .
It is a very disturbing trend indeed


So many disturbing things of late. We don't need no steenking RFP. There is a war on. We don't need no steenking bidding. There is a war on. We don't need no steenking Constitution. There is a war on. I'm sure there are a lot of folks in the government who think (to paraphrase Voltaire on God) "If Bin Laden did not exist it would have been necessary to invent him.". It is so convenient to not have to answer for whatever you want to do because "There is a war on". Frankly I think it is disturbing. We got snookered by Wall Street because we fell asleep and they exploited our greed. Let's not get snookered by government because we fall asleep and allow them to exploit our fear.
Touch 12/4/2012 | 9:54:24 PM
re: Firstwave Follows the Feds Before you start making accusations against the Gov't, do you have any proof that the NRL did NOT follow "procedures".

I used to work for the Gov't. Their bidding and contracting processes are certainly confusing and in some instance border on the inane.

However, I really doubt the NRL were "subverting the Constitution" by awarding an "R&D contract" to a start-up.

If you are looking to point out corruption in Government procurement, why don't you go after the big ticket items, like the Army Crusader or the Osprey?
gwdm 12/4/2012 | 9:54:21 PM
re: Firstwave Follows the Feds Sure it is encouraging to hear that there is business to be had, but 29M over 5 years is not enough to sustain a company. 29M may translate to ~15M profit (if they are lucky) and there burn rate is at least 1M/month (conservatively). This would keep them in operation for maybe a year? I hope they have another customer up their sleeve....
papabear 12/4/2012 | 9:54:14 PM
re: Firstwave Follows the Feds Did the article tell us that the contract was awarded without an RFP or bid process?

RFP's from the government go out to technology companies that have registered with the government procurement agencies. If a company fails to submit or submits but does not meet the criteria spelled out in the RFP they are not involved in the bidding process.

Most companies in 2001 when this was started were more interested in making easy money from the telecom sector. Winning contracts with the government is a time consuming process that takes 1 - 3 years if you are lucky and 5 years as a norm.

Now that the telecom sector is a bust more companies are turning to the government for business. They are discovering that it takes time and patience to deal with the government. It is not for the weak of heart or pocketbook.

Years ago I sat on a board at CECOM (Communications/Electronics Command) the procurement agency for communications and electronics equipment for the US Army. We were tasked with selecting a new satellite system. We received bids from 3 companies. I had the responsibility to evaluate their training and maintenance program for the equipment. My team consisted of 10 servicemen with expertise in these areas.

I was shocked when the proposals were delivered. They were delivered in a semi-trailer for each company. The trailers were full from front to back and bottom to top. There was 3 copies provided and each copy consisted of approximately 400 3" binders. Once the process started we were not allowed to take a day off or go on leave except in an emergency and we were secluded. It took our team 6 months to review our portion of the proposal. Each system cost app. 1.2M and the government was buying 1200 systems for all branches of the military.

I just not sure how many companies in the telecom industry are willing to spend that much time to win a government contract. It probably explains why some companies deal only with government contracts and some only deal with the commercial telecom contracts.
TheChief 12/4/2012 | 9:54:11 PM
re: Firstwave Follows the Feds Great points papabear.

I spent over 10 years on the other side and have written many proposals. The first one I worked on was almost 30 years ago. Yes there was an RFP and and a response. Since I was working for a firm that developed electonic intelligence systems, we were the only firm that got the RFP. This is a very common practice (sole source the contract to a vendor that is providing similar contracts). It is also very common in R&D projects where they want to look at different technologies. They did not subvert the contracting process!
DarkWriting 12/4/2012 | 9:54:09 PM
re: Firstwave Follows the Feds I am hoping these guys do well so that I can remind everyone in a few years of another case where a successful private company got it's start at the teat of the government.

I will then be reminded of the time when my company's 401K administrator/investment banker was whining about the AMT tax and government taking money out of our pockets when discussing our stock options. Never mind the fact that the company got its start through SBIR grants. How about OUR government getting some ROI in its investments?

It's our government, our economy and our money. I see no reason why there are certain critical industries/products that need to be left to the vagaries of the "markets" (yes, there are some that should!).

Onward USA!!!

DW
gardner 12/4/2012 | 9:53:59 PM
re: Firstwave Follows the Feds
It's our government, our economy and our money. I see no reason why there are certain critical industries/products that need to be left to the vagaries of the "markets" (yes, there are some that should!).


Wow! How things have changed! Support for unbridled capitalism and the cult of free markets used to be an integral part of the American creed. Advocating a free market approach for whatever ailed you used to be virtually synonymous with patriotism. I'm amazed. Now mind you, I think free markets are good. I just think that some social goals are not well served by unregulated markets. I'm very suprised to see people coming around to this point of view. Is this some kind of hangover from the riotous parties of the 80's and 90's or are we seeing a reaction to 9/11 here?
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