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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 | 9:24:00 PM
re: Foundry Broadens Its Market But since you probably still work for C-tron whoops riverstoned you could not understand this concept.
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HaHaHa... Scott, keep guessing... I am just glad I won't ever have to sit through one of your sales calls again. I think the FDRY gear is ok for what it is (A basic L2 enterprise switch just like RSTN and EXTR), I just think their deceptive Crisco-like marketing sucks. How about 480 gig switching in a chassis that can only support 120 gig ports... sounds honest to me - NOT! Smells like 3com again. Ever hear of Corebuilder and they way they counted every trace on the backplane as switching capacity. What a joke! This kind of marketing makes Cisco look honest!

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They release a chassis 4 years ago that is already 10GigE ready and you KNOCK THEM ??!!!
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H_ngm_N stop drinking that marketing kool-aid.

10 gig ready my ass. You can put a 10 gig port on any box but if it passes less than 10 gig it is not 10 gig ready in my book. Floundry only does 8 gig until "mucho taco salsa" comes out.


Iipoed 12/4/2012 | 9:23:58 PM
re: Foundry Broadens Its Market Lightheaded. HaHaHa. I am playing golf 2 to 3 days a week, tennis 3 days. Travel when ever I want. Do not need to work ever again. My house is paid for (appraised value is 4.2m). I have 300k income tax free from munis and another 150k from rental properties. What do you have? You are probably still working for whoever I made the sales call you refer to. Oh by the way, just ordered a new Porsche Cab, trading in my old 99 porsche carrera. He who has the most toys wins. Anyway be a man, give me a hint and I will buy you lunch.
True_10_Gig 12/4/2012 | 9:23:57 PM
re: Foundry Broadens Its Market I'll agree that all the current vendor's have announced (or are shipping) what they call 10 Gigabit Etherent, but in my books, what they've actually announced are high-speed Gigabit Ethernet (1 < x < 8) uplinks. In reality, these products are being shoe-horned into older architecture designed to support Gigabit Etherent - which is why ALL the vendors (with one exception and it's not Cisco or Juniper) cannot run (or dream to run) full line rate 10 Gbps Ethernet with their current products.

It's one thing to talk about 10 Gigabit Ethernet, but it's quite another to acutally build a system (and by that I mean complete system with more than one uplink-port of 10 Gigabit Ethernet) and quite another to actually ship a system that supports a fully loaded chassis of 10 Gigabit Ethernet interfaces that delivers multiples of 10 Gigabits worth of performance.
light-headed 12/4/2012 | 9:23:51 PM
re: Foundry Broadens Its Market Juniper (M160/320/640) and Cisco (GSR) both have products that can handle 10 gig on multiple cards at linerate. The company that you are hyping (Force10 from Milpitas) can as well. There are a few other startups that can do it quite easily as well but they are quieter than F10. FDRY will do it with the "grande burrito salsa" chassis. EXTR will probably do it on the "dark cubic zirconium" chassis.
light-headed 12/4/2012 | 9:23:51 PM
re: Foundry Broadens Its Market Lightheaded. HaHaHa. I am playing golf 2 to 3 days a week, tennis 3 days. Travel when ever I want. Do not need to work ever again. My house is paid for (appraised value is 4.2m). I have 300k income tax free from munis and another 150k from rental properties. What do you have? You are probably still working for whoever I made the sales call you refer to. Oh by the way, just ordered a new Porsche Cab, trading in my old 99 porsche carrera. He who has the most toys wins. Anyway be a man, give me a hint and I will buy you lunch.
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You will always be my hero. You are the best!

I live inside a cardboard box in a ghetto in a 3rd world country eating gruel when i can afford it. I wait patiently for the day when i can be a capitalistic dog like you.
metroman 12/4/2012 | 9:23:49 PM
re: Foundry Broadens Its Market So lipoed

You used to work at Cabletron and you now work at Foundry. All you seem to talk about is Riverstone...

You make some points about Cisco that are true, but when did that ever stop Cisco selling anything. Cisco do not operate on a techical level, otherwise there would be alot more of your boxes installed round the world.

Your bitterness shines through more and more with every post. You worked at Ctron and got pummelled by Cisco and now you work at Foundry and get pummelled by Riverstone. The irony of that has really only just struck me...

If your 10Gig card can offer MPLS LER or LSR functionality then it might be interesting... it doesn't. If it was wire speed it might be interesting.... it isn't. If it was value for money then you might want it for capacity.... it is >$70k. So you are selling 8 Gigabit Ethernets that can only do VLANs for $9k per port.... sounds like marketing to me.

And by the way, technically Atrica are the new 3Com. If you want a really old chassis.....

Metroman
Iipoed 12/4/2012 | 9:23:44 PM
re: Foundry Broadens Its Market Never worked at Ctron. Don't work anywhere now, don't need to. Sold cars before I began selling in technology (alot easier sale). I have NO bitterness. This industry set me up for life. I just like to put out posts to upset people like you that seem to be overly serious about this chat forum. I do feel bad for all those that did not cash out when they had the chance and those that work hard and never had the chance to hit the homerum.
Lets face it Riverstoned is a joke. 90% of the people are there because there are no other jobs out there or they would be gone. The writing is on the wall. And since I never ran into them when I was selling I really have no personal hard on about them.
As to LER and LSR- I do not even know what they stand for. I can barely remember what OSPF stands for having been out of the industry for well over a year. I am close to breaking 100 for 18 holes however.
opticaltalent 12/4/2012 | 9:23:43 PM
re: Foundry Broadens Its Market
Hey are you a believer in the adopt a grown up program??? Congrats on having the ability to see a hot market a few years ago (telecom/networking) and then having the ability (i.e. lack of ego about the industry) to cash out when you did!!!

That is awesome and glad someone had the wisdom to get in, get out, and leave it behind. There is SO much gridlock, bitterness, and heartbreak in telecom right now.

If you live in Dallas or are ever in Dallas I invite you to come play golf with me and I will show how to break 90. Send an e-mail to [email protected]
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.
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.
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