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Optical/IP

Wavesmith: Giant Killer?

Did startup WaveSmith Networks Inc. shoulder aside incumbent vendor Lucent Technologies Inc. (NYSE: LU) to win a contract at SBC Communications Inc. (NYSE: SBC)?

That continues to be the speculation following last week’s announcement of the contract, which was followed by WaveSmith’s first Multiprotocol Label Switching (MPLS) product announcement yesterday (see WaveSmith Wins at SBC and WaveSmith Adds MPLS to DN).

"In any contract win, [a carrier is] cutting somebody out and putting somebody in," says Sam Greenholtz, senior analyst at Communications Industry Researchers Inc. He says sources close to SBC told him WaveSmith's gear was picked because Lucent's didn't have some features SBC was looking for -- though his sources said the win is relatively small, about $50 million over a three-year period. Bottom line? The deal may be small, but it’s a nudge in the ribs for bigger players.

Neither SBC nor WaveSmith would comment on these revelations, and both have refused to reveal either the amount of the deal or the list of vendors evaluated. An SBC spokeswoman said yesterday, though, that Lucent continues to be the preferred provider of mid- and high-end Asynchronous Transfer Mode (ATM) switches at SBC, and that it has a significant installed base there. The WaveSmith switch will be used in rural areas with small central offices having six to eight remote terminal connections.

Lucent echoes this. In a statement emailed to Light Reading, a spokesman wrote last week that WaveSmith's win is "a niche play for the rural, low-density aggregation points. Lucent remains the incumbent multiservice switching vendor with SBC... Lucent also continues to develop new features and capabilities for the CBX 500 and GX 5500 Multiservice WAN Switches, including adding standards-based MPLS features. SBC is actively engaged with Lucent on driving added features and functionality on these product lines."

But even if WaveSmith’s present job at SBC is small, that doesn’t mean it will stay that way, according to some observers.

"DSL aggregation is probably not a crucial application... What's potentially huge is WaveSmith's chance to be a player in the [RBOC] environment, where planners are looking at nationwide Frame Relay/ATM infrastructure for the enterprise market," says Tom Nolle, president of network consultancy CIMI Corp.

In Nolle’s view, as SBC and other RBOCs roll out nationwide services, particularly Frame Relay ones, they’ll look to use a different kind of gear than they used in the past. The Lucent switches, like those of other ATM incumbents, were designed to provide sophisticated ATM traffic-management features to a relatively small number of customers with big-pipe needs. In contrast, "next gen" boxes like WaveSmith's dispense with high-end ATM functionality but offer the ability to handle lots of small virtual circuits per interface.

"It boils down to smaller, faster, cheaper," says Erin Dunne, director of research services at Vertical Systems Group. Getting into SBC for a relatively small DSL application means WaveSmith's on the "short short list" when it looks to roll out nationwide services, ones in which the carrier will need to turn up multiple customer connections (for Frame Relay, DSL, and other services) from a central office quickly and easily.

WaveSmith says its MPLS announcement this week has nothing to do with the SBC contract win announced last week. But the addition of MPLS clearly enhances the vendor's ability to handle lots of virtual circuits, which was key to winning at SBC.

"The problem is that every DSL customer is a little circuit. Lots of little circuits fill up virtual paths quickly. MPLS fixes this because it has variable length label size... Not as much traffic engineering is needed,” said Brian Silver, WaveSmith's director of products and technology, in an interview last week.

WaveSmith has long promised to add MPLS to its gear, but Monday's announcement is the first concrete action it's taken. The vendor has unveiled a module for its existing Distributed Node platforms that supports MPLS at rates to OC48 (2.5 Gbit/s). The vendor also unveiled a new MPLS-equipped DN 8100 switch, with a fabric capacity of 40 Gbit/s in and out of the box -- four times the capacity of its existing DN 7100 switch.

The new gear won't be in beta test until next quarter, and it's not set to ship until the fourth quarter of this year.

Meanwhile, the progress of the SBC rollout will be interesting to watch. Will WaveSmith extend its reach? Will Lucent fight back? Time will tell. But it can't be denied that SBC's choice has set loose a flood of questions about the value of different approaches -- and of looking to startup solutions.

— Mary Jander, Senior Editor, Light Reading

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adobe2 12/5/2012 | 12:19:49 AM
re: Wavesmith: Giant Killer? It looks like both Appian and Wavesmith share the same CFO, check both web sites out:
http://www.appiancom.com/corp_...
http://www.wavesmithnetworks.c...

Well, at least Wavesmith is selling some gears that Mr. Savage can count on, campared to when he was at Appian when he was counting nothing....


optical 12/5/2012 | 12:19:44 AM
re: Wavesmith: Giant Killer? Anyone know if there is a strong relationship between Ciena and Wavesmith?
right_leading 12/5/2012 | 12:19:41 AM
re: Wavesmith: Giant Killer?
Pathetic.

You I mean. Pointing out something benign and off topic. Best you can do?

-----------------------------

Author: adobe2 Number: 1
Subject: who is their REAL CFO Date: 4/1/2003 4:01:48 PM

It looks like both Appian and Wavesmith share the same CFO, check both web sites out:
http://www.appiancom.com/corp_...
http://www.wavesmithnetworks.c...

ThurstonHowell3rd 12/5/2012 | 12:19:36 AM
re: Wavesmith: Giant Killer? Oh most certainly - If I recall CIEN invested ~$35 million. Included is a very strong channel (i.e. exlusive) agreeement as well - SCMR, CORV and CIEN all were looking last year to get onto other reveue streams - CIEN was the only ones with the stones to pull the trigger - good for them...
nagoglight 12/5/2012 | 12:19:35 AM
re: Wavesmith: Giant Killer? CIEN invested 5 million in WaveSmith, not 35 million. SCMR, CSCO both looked at WaveSmith last summer, but neither of them was interested.

Rumor has it that if WaveSmith can not find a buyer in next 3 months, then CIEN has the right to buy them for 150 million until early next year (less than 20 cents/share). Of course, "certain employees" will get special treatment from this deal. That's WaveSmith style.

The deal for SBC is worth less than 20 million for 3 years. With over 2 million/month burning rate at WaveSmith, it's hardly enough to get by. CIEN will need to cut some people after acquisition before it can make it profitable.

Former WaveSmith executives should be happy about the fact that the product they built was successful, that should help to ease the pain of being forced out.



--------------------------------------------
Oh most certainly - If I recall CIEN invested ~$35 million. Included is a very strong channel (i.e. exlusive) agreeement as well - SCMR, CORV and CIEN all were looking last year to get onto other reveue streams - CIEN was the only ones with the stones to pull the trigger - good for them...
laester 12/5/2012 | 12:19:33 AM
re: Wavesmith: Giant Killer? The only giants this company is killing are its large employees, as well as the small and medium sized ones.

"certain employees" excluded.

$150 million or whatever (even something much better) wont amount to a lot, especially at over half a billion outstanding shares.
Any company who issues so many shares should be required by law to print each one individually. The print cost alone would consume a major
portion of their worth.

The new management did give out extra shares at 0c awhile ago, but it just meant you weren't shown the new revolving door. Think of em as door passes.

> "The new gear won't be in beta test until next quarter, and it's not set to ship
> until the fourth quarter of this year. "

Well if wavesmith gets bought out around this summer, then they could say anything about the next quarters and it wont matter, will it?..
Overpromise and underdeliver, if at all, is not new to this company.

Just my 0c/share.
allidia 12/5/2012 | 12:19:28 AM
re: Wavesmith: Giant Killer? Why would Ciena pay so much? They would never make a ROI by laying out that much. My guess would put an acquisition at $95 million for the remainder of the company they don't already own. That $5m Ciena invested must have bought them atleast 5%. I have difficulty believing there are 500 million shares outstanding. Anyone second that?
ThurstonHowell3rd 12/5/2012 | 12:19:28 AM
re: Wavesmith: Giant Killer? "Overpromise and underdeliver, if at all, is not new to this company"

I would hasten to say that describes this entire industry - vendor and customer alike - they are all long on breath and short on delivery...
nagoglight 12/5/2012 | 12:19:25 AM
re: Wavesmith: Giant Killer? Believe it. There are more than 600 million shares total, and more dilution is expected. Last round valuation is much less than 100 million, CIEN should have more than 5% equality. As always, CIEN will pay for its mistake soon.





-------------------------------------------------
I have difficulty believing there are 500 million shares outstanding. Anyone second that?
erbiumfiber 12/5/2012 | 12:19:23 AM
re: Wavesmith: Giant Killer? Here is the information on shares outstanding from Yahoo Finance. I don't know how recent it is:

http://biz.yahoo.com/p/c/cien....
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