Optical/IP Networks

WaveSmith Targets Cascade Switch

WaveSmith Networks (NYSE: AMD) has an interesting plan: Hit Lucent Technologies Inc. (NYSE: LU) when it's down.

The approach: Give carriers an alternative to Lucent's carrier ATM (asynchronous transfer mode) switching products by building a competitive product that offers higher density, IP features, and open management interfaces. The primary target is the CBX 500, the carrier switching product that Lucent acquired in its purchase of Ascend/Cascade, which has been the leader in the product category.

"Carriers won't have to change the way they build networks," says Bob Dalias, WaveSmith's President, CEO, and founder, of his plans to offer an alternative to the Lucent products. "It gives us an opportunity to be a second source.

It's a similar strategic approach to the one that Juniper Networks Inc. (Nasdaq: JNPR) used to go after Cisco Systems Inc. (Nasdaq: CSCO). Juniper got its foot in the door by boosting performance of Internet core routers while at the same time offering a compatible product that could be used as a second source. The only question is whether WaveSmith's team has the wherewithal to execute in similar fashion.

Tim Kraskey, managing director at YankeeTek Ventures and a former VP of marketing at Ascend and Cascade, says it's not as easy as it sounds.

"I think they've got their work cut out for them," says Kraskey. "As a management team, executing in a tough marketplace is not going to be easy."

Indeed, WaveSmith's got competition. Of primary concern is Équipe Communications Corp., a company staffed by many of the employees from the CBX 500 team at Lucent (see Équipe Scores Another $51 Million ). And Lucent is working on a successor to the CBX 500, though many of the players involved in the orginal development of the switching platform have left the company, including those that went to Équipe.

WaveSmith says it differs from Équipe in that it's targeting a product for the network edge, rather than the core of telecommunications networks. But that may be splitting hairs. Such positioning puts WaveSmith in an awkward position between a large core switch such as Équipe's and the multitude of access and edge players.

Marketing Position There are other warning flags: WaveSmith has raised $23.5 million in venture capital so far, but that's not a huge amount for an equipment company in a funding environment that's getting tighter.

WaveSmith's products, grouped as a "WaveForm Architecture," will handle TDM (time-division multiplexing), ATM, frame relay, and IP traffic over a protocol-agnostic, packet-based switching fabric, according to WaveSmith officials. The switch will scale to 7.6 Gbit/s per one inch of rack space, and its management system is designed to accomodate standards such as CORBA, SIP, and MPLS, according to WaveSmith's management team.

Despite the challenges, analysts say the market opportunity is large.

"It's an installed base that's huge," says Scott Clavenna, of PointEast Research LLC and Light Reading's director of research, who estimates there must be tens of thousands of Cascade switches installed in telecommunications carrier networks. "Once you bought a Cascade switch, you got locked into the whole product line. It's in almost every central office in the country. The RBOCs are definitely ready for the next generation of product."

Indeed, Lucent is vulnerable in the product category (see Lucent Losing Grip on ATM Core?). The company is also undergoing a major financial and management crisis after announcing several earnings shortfalls and the resignation of former CEO Richard McGinn (see Lucent Starts Cleaning Up).

WaveSmith plans to ship a beta product in the summer and make the product fully available by the end of the year.

-- R. Scott Raynovich, executive editor, Light Reading http://www.lightreading.com
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jimmer 12/4/2012 | 8:50:47 PM
re: WaveSmith Targets Cascade Switch Sounds like "old generation" technology. I believe the future is optical not electrical! Thumbs down
Ishmeal 12/4/2012 | 8:50:45 PM
re: WaveSmith Targets Cascade Switch Go figure, the capital market tightens, and you see startups build to generate revenue and not just arcticle to ge themselves flipped! Kind of a ballsy approach if you ask me.
telwatch 12/4/2012 | 8:50:45 PM
re: WaveSmith Targets Cascade Switch Its about time a vendor has went after a market that is actually making money and not just headlines. LU have a new product...did they mean the summer of 02 or 03...
fk 12/4/2012 | 8:50:45 PM
re: WaveSmith Targets Cascade Switch How far in the future? What if you want to get revenue now? How much of a market are you willing to write off to try to get a piece of the future?
beantown21 12/4/2012 | 8:50:44 PM
re: WaveSmith Targets Cascade Switch yea, i'd say there's a pretty immediate need to replace these products now
instead of waiting for "all optical" slideware to materialize did anyone
read about the att outage last week?

Taken from network world online...(Earlier this week a Lucent CBX 500
Multiservice WAN Switch started a network management message firestorm that
overloaded 7% of all switches on AT&T's ATM network for about 4 hours.

"AT&T has a lot of ATM customers and when 7% of the network is affected most
if not all see some incidental impact," says Dale McHenry, product vice
president for data services at the carrier. While some users experienced
network slowdowns, others were completely shut out.

Ishmeal 12/4/2012 | 8:50:43 PM
re: WaveSmith Targets Cascade Switch "...which means they can perform layer-2 switching as well as layer-3 routing, with many protocols supported."

You mean IP Navigator? Yea, that worked real well. ;-)

Harley 12/4/2012 | 8:50:43 PM
re: WaveSmith Targets Cascade Switch All:

The ATM Core Switching environment is far from dead. Lucent has positioned the CBX/GX switches as "multi-service" which means they can perform layer-2 switching as well as layer-3 routing, with many protocols supported.

This is a very good market to be in, one that LU has a good hold on. Service Providers want to provide voice and data, the killer app being voice, ehich IP cannot handle on a carrier-grade basis.

That's why ATM/Multiservice switching is a good market. As an insider, I can tell you that Beantown is correct, LU has been having some quality problems with the CBX switches, so they are ripe for a competitor to blow them away.

However, the next gen multi-service switch they are building is a monster, definitely cutting edge, and it is scheduled for roll-out around August 2001.
exlueng 12/4/2012 | 8:50:42 PM
re: WaveSmith Targets Cascade Switch The Oz switch doesn't have a prayer of getting out this year.

I wish it were so -- I still hold too much of their stock, but I doubt it'll be cutting edge or out on time. You are correct about one thing - it'll doubtless be a monster.

It'll be interesting to see if Equipe can loosen LUcy's hold in the center and Wavesmith can do the same closer to the edge.

Harley 12/4/2012 | 8:50:37 PM
re: WaveSmith Targets Cascade Switch You guys are funny! I hate to say it, but I can't argue with either statement about OZ or IP Navigator!
realdeal 12/4/2012 | 8:50:35 PM
re: WaveSmith Targets Cascade Switch Can anyone help me out??

I read that they took 12.5 mil in debt funding after taking 12 mil in 1st round.

Is debt funding good or bad?
Why would someone go this route vs. traditional 2nd round?

Are there any negatives associated with debt funding? Does the stock dilute with debt funding?

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