According to The Marker.com, an Israeli business news publication, ECI is in talks to invest $6 million to $20 million in Chiaro, which has already raised $210 million. The deal gives ECI an option to acquire Chiaro for $20 million to $30 million.
Officials at Chiaro and ECI were not immediately available for comment.
Chiaro's Enstara router has won a few deals in research networks, and the company claims to be in trials with a passel of large carriers (see Chiaro Seeks Its Footing). But carriers worry that startups might vanish, and they like to see the backing of a larger company to ensure the product will live on if the startup doesn't.
Chiaro needs that element of trust, because the company's router is being pitched for overhauls where carriers hope to converge multiple networks onto a single core based on Internet Protocol (IP) and Multiprotocol Label Switching (MPLS). Enstara would not only sit at the core, but would also reduce the number of routers needed at the core, Chiaro officials say.
If it lands ECI, Chiaro will at least have solved the partner side of the equation. The problem for Chiaro has been that most of the big players are spoken for. Alcatel SA (NYSE: ALA; Paris: CGEP:PA), Cisco Systems Inc. (Nasdaq: CSCO), and Juniper Networks Inc. (Nasdaq: JNPR) have their own core routers -- the 7750 Service Router, CRS-1, and T640, respectively. Lucent Technologies Inc. (NYSE: LU) is reselling Juniper's routers, and Huawei Technologies Co. Ltd. and Nortel Networks Ltd. (NYSE/Toronto: NT) both have reseller deals with Avici Systems Inc. (Nasdaq: AVCI; Frankfurt: BVC7).
ECI, meanwhile, participates in the metro market selling equipment including multiservice provisioning platforms (see ECI Intros Small MSPP and ECI Merges WDM With MSPP). But the company doesn't have a core router to call its own.
Building a core router is an expensive gamble, but startups continue to roll the dice. Having tried once with Nexabit Networks (acquired by Lucent), Mukesh Chatter has founded Axiowave Networks Inc. to chase the core, and Cisco has invested in BCN Systems Inc., a Silicon Valley startup reportedly working on a core router. (See Axiowave Queues in the Core and BCN Joins Router Race.)
— Craig Matsumoto, Senior Editor, Light Reading
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- Light Reading's Telecom Investment Conference, in New York City, December 15, 2004
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