Optical/IP Networks

Sycamore Goes Shopping

Sycamore Networks Inc http://www.sycamorenet.com (Nasdaq: SCMR) is getting set to buy a metro area optical networking startup, according to several industry sources.

It’s easy to see why. Sycamore needs to extend its product portfolio in order to compete with hugely acquisitive juggernauts like Cisco Systems Inc. http://www.cisco.com (Nasdaq: CSCO), Nortel Networks Inc. http://www.nortel.com (NYSE: NT) Inc., and Lucent Technologies Inc. http://www.lucent.com (NYSE: LU).

At the same time, recent acidic stock market conditions have knocked 30 to 60 percent off of optical networking startup’s valuations (see Optical Valuations Take a Hit), making now a good time to go shopping.

The tricky part is working out who Sycamore will buy. According to Light Reading’s sources, Sycamore has been talking to at least five startup companies working on service provisioning platforms for metropolitan area networks:

* Appian Communications http://www.appiancom.com
* Alidian Networks Inc. http://www.alidian.com
* Astral Point Communications Inc. http://www.astralpoint.com
* Mayan Networks Inc. http://www.mayannetworks.com
* Sirocco Systems Inc. http://www.siroccosystems.com
Of the five, Sycamore is said to be most interested in Alidian and Sirocco.

“Those are all natural suspects,” comments Gordon Lee, president and vice-president of engineering at Geyser Networks Inc. http://www.geysernetworks.com, another service provisioning platform startup (see Sonet Goes POP).

Sycamore has no choice but to go on an aggressive buying spree. Its last filing to the Securities and Exchange Commission shows that all of its revenues derive from two long haul products (the SN 6000 Intelligent Optical Transport product, and the SN 8000 Intelligent Optical Network Node.

Meanwhile, companies like Cisco have essentially proved that the only way to assure long term success in the networking industry is by building a wide portfolio of products through acquisitions.

At the moment, Sycamore is in catch-up mode versus its competition. It has yet to buy anyone. It also is rumored to have made an unsuccessful bid on Chromatis, another metro startup, which was today sold to Lucent (see Lucent To Buy Chromatis? and Lucent Catches Chromatis).

The metro market may not be the only place that Sycamore is looking to make a purchase. It’s also hotly tipped to acquire Tenor Networks Inc. http://www.tenornetworks.com, which makes a product that helps carriers funnel legacy traffic on and off optical backbones (see Tenor Builds A Network Toll Booth ).

If Sycamore can acquire a hot service provisioning platform from a startup, add in Tenor’s network linchpin, and combine it with its own long haul line of equipment, it will have all the pieces of a powerful end-to-end solution in place.

“The Tenor rumor is bolstered by the fact that the two companies lead the ODSI forum. And they have very complementary strategies and technologies,” says Scott Clavenna, principal analyst at Pioneer Consulting LLC, http://www.pioneerconsulting.com. Dan Smith, president of Sycamore, also sits on Tenor’s board.

One thing is clear: there are plenty more acquisitions in the pipeline, although the whirligig pace of optical acquisitions in the networking industry has even the experts in a spin. “I hadn’t heard [about Sycamore talking to the five vendors]. I thought Sycamore was buying Tenor. This market is nuts!” says Clavenna.

Sycamore and Astral Point declined to comment. Appian, Alidian, Mayan, and Sirocco could not be reached at press time.

Stephen Saunders, US Editor, Light Reading http://www.lightreading.com

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