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Force10 Revs Revenues

Light Reading
News Analysis
Light Reading
6/30/2005

The Force10 Networks Inc. revenue ramp is underway, as the company could make as much as $60 million in revenues this year, according to venture capitalist Dick Kramlich.

In an interview published on Light Reading earlier this week, Kramlich -- a founder of New Enterprise Associates (NEA) and a 40-year Silicon Valley player -- says revenues in 2005 are expected to be $60 million, up from $27 million in 2004. The growth is even more impressive considering Force10 took in just $3 million in 2002 (see Dick Kramlich, Founder & General Partner, NEA). These days, Kramlich finds himself involved in two very expensive startups that look like good gambles so far. One is Vonage Holdings Corp., the VOIP poster child.

The other is Force10, the 10-Gbit/s Ethernet switch vendor that concentrated on a high-end niche and is succeeding with what Kramlich says are "the most demanding customers in the IT world."

The key for Force10 is to keep one step ahead of the competition -- Extreme Networks Inc. (Nasdaq: EXTR) and Foundry Networks Inc. (Nasdaq: FDRY), but mostly Cisco Systems Inc. (Nasdaq: CSCO). Having been involved with Ascend Communications and Juniper Networks Inc. (Nasdaq: JNPR), Kramlich has been on the wrong end of a Cisco price war. The key is to come out with sharp technology, he says, citing Juniper's ASIC development as a reason for that company's success.

Force10 has been a tough call for Light Reading's Top Ten Private Companies list, because it's difficult to see the company's exit strategy. (The list ranks the companies most likely to be acquired or go public.) It's kept a high ranking, but an IPO seems the only way out, because, having raised $209 million, Force10 would be a pricey acquisition (see Force10 Networks and Force10 Rakes It In).



Industry watchers say Juniper should be an interested buyer, but Juniper CEO Scott Kriens has decried the idea of getting into Ethernet switching, and most sources agree Juniper wouldn't pay Force10's asking price anyway (see Juniper Spikes M&A Rumors).

All that venture money was necessary to groom Force10 as a multi-generational play. Rather than stake the company on one box, the board opted to develop a family of products to convince customers Force10 would stick around. That takes "a lot of preparation and simultaneous development, which costs money," Kramlich says.

On the customer front, life doesn't begin and end with Google (Nasdaq: GOOG), Kramlich says. Yes, the search-engine company is Force10's most famous disclosed customer, but Kramlich notes Force10 has racked up at least 124 others.

Kramlich also discusses leaving the Juniper board, visiting Huawei Technologies Co. Ltd., and surviving the VC bubble. Read the full interview here: Dick Kramlich, Founder & General Partner, NEA. — Craig Matsumoto, Senior Editor, Light Reading

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