Quarry Wins First Customer

Quarry Technologies Inc., which makes a line of security service devices, says it has a “multimillion” dollar deal to provide South Korea's Dacom Corp. with several of its iQ8000 routers (see Dacom Picks Quarry for Security).

Ian Mashiter, president and CEO of Quarry, says the current contract is for the initial phase of the carrier's network buildout. He says the value of the deal -- the company's first equipment contract -- will be worth less than $10 million.

Dacom will also be able to use the iQ8000’s to provide individual customers with network-based security services like firewall filtering, denial-of-service (DOS) prevention, network address translation (NAT), virtual routing, VPN tunneling, encryption, and traffic shaping. Quarry's gear will be installed at the edge of Dacom's Multiprotocol Label Switching (MPLS) backbone network to provide a gateway between its IPSec remote access network and its MPLS backbone. The box will terminate access-network connections, identify subscribers and classify traffic flows, and send that traffic over the MPLS backbone.

Interestingly, Quarry appears to have beaten rival CoSine Communications Inc. (Nasdaq: COSN) for a chunk of Dacom's business. CoSine had announced a contract with Dacom last April to provide the carrier with its IPSX 9500 to do NAT. The CoSine gear, which also provides network-based firewalling, IPSec, and MPLS VPN termination, could have been used for the same function as the Quarry gear.

“We are not displacing them,” says Mishiter. “But you don’t have to be a genius to understand that they have chosen us as a new vendor, and they haven’t chosen a vendor they are already using.”

CoSine did not return calls by presstime.

Quarry's win is a big deal, as many startups have attempted to gain footing here and have failed. Celox Networks, which started around the same time as Quarry, has gone out of business (see Is Celox Farewell an Omen?).

Currently, CoSine and Nortel Networks Corp. (NYSE/Toronto: NT), with its Shasta product, are the two main competitors in this market. While Shasta has sold well for Nortel, CoSine has struggled for the past two years to win new business. Investors have even pressured the company to liquidate its assets and return cash to the shareholders (see Mellon Hires Banker for CoSine).

In 2002, IP service routers only generated about $123 million, according to Infonetics Research Inc. The entire edge router/IP service switch market was about $1.7 billion in 2002. Analysts don’t expect too much growth in IP service switches over the next few years. Infonetics predicts revenues of only $300 million by 2006, compared to $3.6 billion for the entire edge router market in 2006.

“I don’t see this market generating a lot of revenue,” says Infonetics analyst Kevin Mitchell. “But it seems like carriers are more interested in network-based security now and MPLS gateways. It could be a good little niche.”

Mitchell warns that IP edge routers could still take a good chunk of this business from IP service switches. Edge routing market leaders Cisco Systems Inc. (Nasdaq: CSCO) and Juniper Networks Inc. (Nasdaq: JNPR) have already begun adding firewalling and IPSec functions to their routers.

For now it seems the edge routing security features are not robust enough for some carriers. For example, Dacom already uses Cisco routers in its core and at the edge of its network, but it is deploying Quarry for network-based security services and the MPLS gateway.

Quarry has raised a total of $66.5 million in venture funding to date, and it's out raising more right now. Mashiter, however, says the 55-person company doesn’t need any more venture support. “The additional funding will be good to have,” he says. “But we are looking to really fund the company based on revenues rather than equity.”

— Marguerite Reardon, Senior Editor, Light Reading

CanMan 12/4/2012 | 11:41:29 PM
re: Quarry Wins First Customer Good god, how can these guys still be in business and why on earth would you buy something from these guys?
Upside_again 12/4/2012 | 11:41:27 PM
re: Quarry Wins First Customer "CANNED" MAN - You still unemployed and bitter? This news is quite admirable. Or you from thier competiton who got thier rear-end booted?

Congats. to QUARRY !!!
CanMan 12/4/2012 | 11:41:21 PM
re: Quarry Wins First Customer I am in no way affiliated with CoSine or Quarry, just an outside observer.
The reason I am surprised is that Quarry has been around, what, almost 5 years? And they have one customer?
So, in another 5 years they will announced their second customer!

edgehead 12/4/2012 | 11:41:04 PM
re: Quarry Wins First Customer Something is wrong here. The guy from Dacom that Quarry quoted in their press release - Jae-Mo Seung - no longer works for Dacom and hasn't for some time. I find it hard to believe that Quarry was unaware of this. If they're quoting non-existent people in their customer announcements, what does this mean for the deal? LR, check it out!
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