ZettaCom Lands $19M
The third-round money brings ZettaCom's total funding to a cool-looking $77.7 million. The round was led by Norwest Venture Partners and new investor Investcorp, joined by 15 other firms. Richard Fuller, a partner with Investcorp, is joining ZettaCom's board (see ZettaCom Lands $19M).
"That gives us the reserves to make sure we can go to profitability. It's important to have that reserve, because when you talk to companies, they want to make sure you're financially stable," Liesenberg says.
ZettaCom hadn't yet exhausted the money from its previous round (see Zettacom Set to Score $47.5M), so the new funding should sustain the company beyond the end of 2004, Liesenberg says.
News has been otherwise glum in Switch Fabric Land. Startup TeraCross Ltd. began closing down recently, and Zagros called it quits earlier this year (see TeraCross Shuts Down and Oath (#@%#!!) of Allegiance).
This is happening at a time when network processor vendors are starting to feel upbeat about the future (see Avici, Riverstone Pick Processors). But it's a tougher haul for the switch fabric firms.
"They're all kind of struggling because there aren't that many new chassis designs coming out," says Jag Bolaria, analyst with research firm The Linley Group.
New chassis are important because a switch fabric is one of the first architectural decisions in the design of a system. So for switch fabrics to thrive, new systems need to start development -- and that's not going to happen this year, Bolaria says. "The switch fabric space for the next six months or so looks like it's going to be pretty barren."
Of course, fabric upgrades do happen; Liesenberg notes that Cisco Systems Inc. (Nasdaq: CSCO) has sold new switch fabrics and backplanes for its GRS 12000 routers. But the odds of a startup getting that kind of design win are slim, particularly with ASIC-minded companies such as Cisco.
The good news is that Bolaria sees hope for 2004.
"I'm expecting things to pick up early next year, because if you look at design cycles, they're six or seven years -- and the last cycle was '99. If you kind of work backwards, activity picks up next year," he says. That is, if the next generation of system architectures should emerge around 2006, those boxes need to start designing in 2004, meaning there could be some switch-fabric shoppers on the prowl next year.
Assuming that logic plays out, ZettaCom now has the resources to survive into the next design cycle. The company will be going against established vendors Agere Systems (NYSE: AGR.A), Applied Micro Circuits Corp. (AMCC) (Nasdaq: AMCC), IBM Corp. (NYSE: IBM), and Vitesse Semiconductor Corp. (Nasdaq: VTSS), as well as new entrant Marvell Technology Group Ltd. (Nasdaq: MRVL) and startups Dune Networks, Erlang Technology Inc., Kichips Inc., PetaSwitch Solutions Inc., Tau Networks Inc., and TeraChip Inc.
ZettaCom, which offers a traffic manager designed to interoperate with its switch fabric, also competes with startups developing multiple networking chips as a package, including Internet Machines Corp., Sandburst Corp., and Silicon Access Networks Inc.
— Craig Matsumoto, Senior Editor, Light Reading