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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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Iipoed 12/4/2012 | 9:23:01 PM
re: Foundry Broadens Its Market Wiley thanks for the mature response. I'm still a big share holder in Foundry and believe in their long term success. However I do hope that they will acquire a higher end product company i.e. F10 or procket would be great. No matter what anybody says on these boards, Bobby Johnson is a visionary, a straight shooter who does the best he can for his people and his customers.

Only bragged about the $$ because I cannot hope to keep up with most of the engineers on this board technically and was just hoping to establish some credibility. I must admit, my SE, the best in the business (retired as well) only allowed me on the white board for 5 minutes per sales call.

I believe personal emails are a no no on these boards.

Lastly to compare Foundry to 3 com is crazy. Foundry is not a commodity vendor, they do not utilize 2 tier distribution, VARS etc to sell their products. They go direct. Look to EXtreme for the new 3 com only with far superior products.

lightbulb0 12/4/2012 | 9:23:15 PM
re: Foundry Broadens Its Market When Foundry is jammed with 3Com trained people, the result is expected. They only know how to build a 3Com or the worse, without BJ's approval but with his ignorance.
wilecoyote 12/4/2012 | 9:23:20 PM
re: Foundry Broadens Its Market Getting rich doesn't make you a capitalistic pig. What are you, a socialist?

Bragging about how much money you've made might make you something, but there are worse things to be called than a capitalist.

What I like about Iipoed is that even though he's made all that money and long since quit Foundry he's still selling for them in these boards. Gotta love that. Most sales guys would take off and not give a damn what happens to their alma mater. Hats off to a sales guy who actually cares.

Still think Force10 is going to put Foundry out of business but I won't make any money if they do so he gets the last laugh anyway.

Iipoed I've got a membership to a great club in the Bay Area (you'll know it, and believe me will want to play it), and my handicap is right where yours is maybe a little better. Give me your email address and we can play a round or two.
vapa 12/4/2012 | 9:23:27 PM
re: Foundry Broadens Its Market BTW, I personally wouldn't mind being in his shoes
right now. Personal fortune (for those that don't
inherit it) is usually a function of timing, luck,
and hard work. From what I have seen of Iipoed on
these boards he had good measures of all three.


No, man, it's all about timing and luck. You would have been in Iipoed's shoes if you worked at one of the bombed .com companies that IPO'ed and sold the stocks at the peak. Screw hard work and engineering. I wanna be a sales guy like Iipoed and be a capitalistic pig. :P
Iipoed 12/4/2012 | 9:23:29 PM
re: Foundry Broadens Its Market metroman-actually I have 24 years of Telecom experience, 5 with ADC, 9 with Memorex/Telex,4 with Crisco's main competitor in LAN space.
Most of my posts come from my direct experience in sales situations and customer's experience with products and support.
Just broke 100 for 18 and I only took up the game a year ago.

BTW it is I ipoed, not Lipoed.
Now go on market some old c-tron gear code named riverstoned
mrcasual 12/4/2012 | 9:23:29 PM
re: Foundry Broadens Its Market So you have no industry background, you are set up
for life and you spend your time being slightly above
average at golf and placing comments on discussion
groups in which you have no interest.


I don't know about being slightly above average if
he can't break 100 after being retired for a while.
Unless of course you just took up the game, in which
case kudos to him.

BTW, I personally wouldn't mind being in his shoes
right now. Personal fortune (for those that don't
inherit it) is usually a function of timing, luck,
and hard work. From what I have seen of Iipoed on
these boards he had good measures of all three.

Good for him and good luck to the rest of us.
metroman 12/4/2012 | 9:23:29 PM
re: Foundry Broadens Its Market Lipoed

But you spend all your time putting nonsense comments on these boards, curious?

So you have no industry background, you are set up for life and you spend your time being slightly above average at golf and placing comments on discussion groups in which you have no interest.

I hope I never meet you I might die of boredom.

I think you should learn your subject if you are going to post on the boards, although its an interesting defence, ignorance. Only the ignorant are truly enlightened, and you are truly enlightened.

Metroman
True_10_Gig 12/4/2012 | 9:23:36 PM
re: Foundry Broadens Its Market Light-Headed,
I wish Procket and your other 'hush-hush' company well. God knows the industry needs something to get us out of the doldrums.
light-headed 12/4/2012 | 9:23:38 PM
re: Foundry Broadens Its Market You have to get better market intelligence. I know of at least 2 startups with multi-10 gigE per slot chassis that are in trials in the next 3 mos. One is in Milpitas and is very well known and the other is in Mountain View and very stealthy. They are both routers though... not LAN switches. One is core player and the other edge.
True_10_Gig 12/4/2012 | 9:23:42 PM
re: Foundry Broadens Its Market Light-Headed,

I should have been a little more specific...show me customers using Juniper and Cisco's 10 Gig ETHERNET systems(and please recall my previous comments about the different between uplinks and systems). I'm not very interested in OC-192 SONET because the service provider market is in a tailspin. And these other 'quiet' start-ups you mention, I haven't seen any other 10 Gig Ethernet vendors nor are the VC's funding any at this time.

Finally, building a 10 Gig system is not as easy as you would have other's believe (remember ALL the problems that Juniper AND Cisco had with their 'first' 10 Gig SONET platforms?).

Foundry is resource constrained to sling out another fast food entree and Extreme has to deal with their from internal political and quality issues BEFORE they'll be ready to take on any new challenges.
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