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Redback Completes IP ASICs

Light Reading
News Analysis
Light Reading
11/16/2000

The competition between Redback Networks Inc. (Nasdaq: RBAK) and Cisco Systems Inc. (Nasdaq: CSCO) is about to heat up.

Redback has finished development of the seven application-specific integrated circuits (ASICs) for its line of SmartEdge optical networking products, and it plans to enable the IP services features of this product line by the second quarter of next year, according to company officials.

This development, made public by CEO Vivek Ragavan this week at the UBS Warburg Global Telecom Conference, means that IP services could set Redback's SmartEdge product apart from competitors such as the ONS 15454 product offered by Cisco.

"Two weeks ago we got the last of our seven ASICs back and they work," said Ragavan. "We are now seven for seven." He said that LSI Logic Inc. (NYSE: LSI) and IBM Corp. (NYSE: IBM) are fabricating the ASICs for Redback.

This completes the development of all the ASIC designs Redback got through its acquisition of Siara Systems, which has yielded its SmartEdge optical networking line (see Redback’s Siara Box Enters Trials ). The development of this product is crucial as the company taps new growth in next-generation Sonet, an optical networking technology used to combine voice and data services in metropolitan areas.

Redback's first quarter of sales for its SmartEdge exceeded expectations. Announced in the company's earnings statement for the third quarter of 2000, they hit $16 million (out of total revenues of $81 million), while most analysts had expected only $10 million. Company officials this week reiterated their financial forecast for the fourth quarter of this year, saying they expect $100 million in total sales, with $25 million of that coming from the SmartEdge line.

The next-generation Sonet market addressed by the SmartEdge product is expected to account for $930 million in sales this year, according to Pioneer Consulting, By 2004, Pioneer forecasts, sales of next-generation Sonet hardware will increase to $6.3 billion (see Report Forecasts Metro Winners, Losers ).

Cisco, which was first to enter the market with the product it acquired through the acquisition of Cerent, has dominated it. The other major player is Cyras. But Cyras has recently undergone some major management shifts, and the product has not yet shipped (see Another Cyras Exec Quits ).

-- R. Scott Raynovich, executive editor, Light Reading http://www.lightreading.com

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