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Optical/IP

Foundry Broadens Its Market

Foundry Networks Inc. (Nasdaq: FDRY) is rounding out its product offering by introducing a new suite of midrange enterprise data-center switches that support gigabit over copper and 10-Gbit/s Ethernet interfaces (see Foundry Extends GigE Over Copper).

Foundry already has a solid portfolio of products, as demonstrated by its latest quarterly earnings. Revenues for the third quarter of 2002 came in at $76.6 million, slightly up (yes, up) from $74.7 million a year earlier (see Foundry Bucks the Trend). It also reported its fifteenth consecutive quarter of profits.

Foundry has gained a reputation for selling high-end, high-performance switches to Web hosters and other service providers with large data centers. But over the past year and a half, Foundry has worked hard to increase its presence in enterprise accounts. Judging from the market figures it released during its third-quarter earnings call, the company has made significant progress. It generated 80 percent of its business from enterprise customers last quarter, compared to only 50 percent back in 2000 when it went public.

These new midrange products announced today are another indication that Foundry is targeting the enterprise. They are designed for small to medium-sized enterprises that don't need a large ServerIron or FastIron. It also gives customers an alternative to fixed configuration products.

“I think this is consistent with Foundry’s strategy, which is to be a top switching company,” says Zeus Kerravala, an analyst with Yankee Group. “They aren’t trying to be a service provider switching company or an enterprise switching company: They want to address both markets equally well.”

The new products include:

  • EdgeIron 24G, a mid-range fixed-configuration Layer 2 Gigabit Ethernet switch.
  • FastIron 3208RGC, an advanced Layer 2/3 modular switch with 10- Gigabit Ethernet expandability
  • ServerIron 100-8GC02F, a mid-range Layer 4/7 Gigabit Copper system for load-balancing servers, firewalls, and caches.
These new products will expand Foundry’s gigabit-over-copper and 10-Gbit/s Ethernet product lines. Currently, it sells low-end, fixed configuration Layer 2 switches that compete with boxes from Cisco Systems Inc. (Nasdaq: CSCO) and Extreme Networks Inc. (Nasdaq: EXTR). It also sells highly scaleable, modular Layer 3 switches that compete with gear from Cisco. And it sells high-end Layer 4-7 load balancing switches, a market that generates roughly 15 percent of the company’s quarterly revenues, notes Mark Sue an analyst with CE Unterberg Towbin.

But until now, the company has not offered products to address the midrange market. As more and more enterprises build out their own data centers, this has become an important market to address. Foundry has already offered 10-Gbit/s Ethernet interfaces on its high-end FastIron products. Now it will also be offering these interfaces to the new midrange FastIron product, too.

“I don’t see demand for 10 Gbit/s in any meaningful way for another 12 months,” says Kerravala. “But as PC manufacturers start putting 10/100/1000 interfaces on desktops the demand will grow.”

Foundry, Extreme, and Cisco are all offering 10-Gbit/s Ethernet interfaces. But at the moment, the products each have only one 10-Gbit/s uplink. Force10 Networks Inc. is the only company to offer multiple 10-Gbit/s Ethernet interfaces, according to Kerravala (see First 10-Gig Ethernet Switch Arrives). Foundry is working on a denser product code named “Mucho Grande.”

“Dense 10-Gbit/s Ethernet interfaces will eventually be important on service provider gear as Gigabit Ethernet propagates throughout the enterprise,” says Kevin Mitchell, an analyst with Infonetics Research Inc.

Processing power of desktops and of servers is increasing dramatically, making gigabit-over-copper in the enterprise a cost-effective means for boosting bandwidth. From the first quarter of 2002 until the second quarter of 2002, 1-Gbit/s Ethernet interface shipments with LAN on the motherboard have increased by one million units, according to market research firm Dell'Oro Group. What’s more, prices on gigabit-over-copper network adapters for the servers and desktops have declined dramatically to below $100 per adapter. This, coupled with the availability of 10-Gigabit Ethernet interfaces, makes gigabit-speed networking in the enterprise a reality. Foundry’s new line of products helps position the company to cash in on this windfall.

In a research note issued this morning by Unterberg Towbin's Sue, he reiterated his positive stance on the company.

“With continued momentum from its existing products and new product launches combined with record backlog, we are reiterating our N/T and L/T BUY ratings,” he writes. “Our 12-24 month price target remains unchanged at $12 or 46x our CY03 earnings of $0.26.” But he warns that a prolonged lag to recovery in both enterprise IT spending and service provider capital expenditures could hurt the company’s ability to reach these targets.

Foundry was trading down $0.27 (3.47%) to $7.52 per share.

— Marguerite Reardon, Senior Editor, Light Reading
www.lightreading.com Want to know more? The big cheeses of the optical networking industry will be discussing 10-Gig Ethernet at Lightspeed Europe. Check it out at Lightspeed Europe 02.

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light-headed 12/4/2012 | 9:24:18 PM
re: Foundry Broadens Its Market FDRY has taken the 3com mantle! Instead of new products they just take the same tired old chassis and put new cards in them. VOILA! New product line... hahaha... No new products... just rename the old ones. Somewhere Eric Benhamou is shaking in rage.

Great quote from zeus though... maybe we can get one from Athena or Apollo next time.
wilecoyote 12/4/2012 | 9:24:17 PM
re: Foundry Broadens Its Market I heard some very good sales and marketing people from Cisco, Extreme and Foundry have joined Force10 recently. Sales and marketing people who are good never move to a competitive startup company from a financially healthy company, especially in these times, unless there is something special going on.

Eric Benhamou is the guy who screwed up 3Com, Light-headed. No freaking question about it. Finocchio should have been CEO.
Lancelot Lightwave 12/4/2012 | 9:24:13 PM
re: Foundry Broadens Its Market Why is LR covering enterprise? What's Gig over copper got to do with optical networking? You started out as "the global site for optical networking" for service providers... then you found some easy targets in softswitches and packet telephony (no optical angle there)... now enterprise. Looks like LR is the one that "broadens its market". Home networking and telecommuting anyone?
light-headed 12/4/2012 | 9:24:11 PM
re: Foundry Broadens Its Market Gee Scott... what is the real difference between Fastiron, Netiron and Bigiron? couple of sw hacks and some modules, basically nothing... sounds like netbuilder/linkbuilder syndrome to me. I am not knocking the product or upgrade path but they just keep releasing the same products with a new port configuration or linecard and call it a new product.

Let's see that mucho grande that they have been talking about for 4 years already. Hello new 3com! I don't like cisco but at least they actually come out with new products once in a while. 4+ years between chassis is a very long time.
Iipoed 12/4/2012 | 9:24:11 PM
re: Foundry Broadens Its Market Face it. Advertising pays the bills. The enterprise infastructure companies have money. Why not cover their adventures since they are helping keep the LR doors open.
Iipoed 12/4/2012 | 9:24:11 PM
re: Foundry Broadens Its Market Yeah, Foundry should be more like Cisco, require backplane updgrade, replace power supplies and supervisory modules but since the chassis remains the same it is not called a forklift upgrade.

What a dumb post, the new 3 com. Do you even understand what it means to be able to stick a 10 gig module or a gig copper module into a chassis without any headache? That is what Foundry provides. Piece of mind, price protection and very reliable performance leading technology.
H_ngm_N 12/4/2012 | 9:24:08 PM
re: Foundry Broadens Its Market They release a chassis 4 years ago that is already 10GigE ready and you KNOCK THEM ??!!!

I agree they deserve harsh criticism for not releasing a 'mucho grande' box though. It must be tough trying jury rig solutions with these boxes when all you have to work with are POS, GigE fibre, GigE copper, 10GigE, MPLS and full L3 support.

Who cares if its basically the same box ? The port density/feature combination address a new market segment.
mugwhump 12/4/2012 | 9:24:03 PM
re: Foundry Broadens Its Market I have seen the Force10 stuff. They may be on to something, as they are the only ones that can put a large number of 10GE blades (28) in a chassis and have any type of performance. Floundry, Criso and Barney seem to be happy if they can actually get one or two blades in a chassis, never mind any type of performance.

This is a small niche, but performance is paramount in the minds of most that want 10GE. We shall see how this pans out.
listen2this 12/4/2012 | 9:24:03 PM
re: Foundry Broadens Its Market Speaking of 3com, what are they up to?

Iipoed 12/4/2012 | 9:24:02 PM
re: Foundry Broadens Its Market light-headed. Maybe we can go on a first name basis since you seem to know me. Not much difference between the various chassis other than tweking on the backplane. so what. do you honestly think customers want 10 different chassis solutions from the same manufacturer. Most IT managers take pride what their network room looks like. Not to mention the ability to quickly replace failed hardware by jury rigging until the actual replacement blade,power supply arrives. Hey price performance, convenience, ease of install and reliability are important.

But since you probably still work for C-tron whoops riverstoned you could not understand this concept.
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