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Optical/IP

ZettaCom Lands $19M

ZettaCom Inc. today announced a $19.2 million round of funding that should last the 60-employee company into 2005, according to vice president of marketing Paul Liesenberg.

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

kongfromhk 12/4/2012 | 11:46:06 PM
re: ZettaCom Lands $19M This co was started by a bunch of greedy morons from Cisco with the intention of selling the company back to cisco. How can the chief architect of a switch fabric company be a lousy SNMP software developer who can't speak a word of english correctly? To evaluate the technical merits of a company, all you need to do is to find out who the cheif architect is. If idiots like him are architecting the switch fabric, only GOD can save that company.
10Gig 12/4/2012 | 11:46:25 PM
re: ZettaCom Lands $19M I believe most of the switch fabric companies in the valley (and elsewhere in US) were never started with the intent to become silicon vendors. They were started mostly as acquisition ploys by engineering rejects from big chip companies, who wanted to make a quick buck out of the bubble spending by being that one trick pony in the eyes of one of the 900lb gorillas. (some crazy design spec on a shabby powerpoint presentation - created while smoking some of the good stuff)

as for design, it would be quite correct to say that switch fabric vendors either wanted go as high-price/low volume but with goddamn good design, meeting all its promises OR something cheap/high volume that does the job, just dont ask 'how well'. Most chose to go the good design route because fabric performance is critical to system performance.

some of these guys never ever planned to come out with chips. they and their greedy VC buddies jumped in with their pocket change hoping to sell to a big company based on some initial stage RTL design which they thought would be enough to prove that they got the next 'sliced bread'.

the bust forced these guys to start thinking of long term sustainability, cost effectiveness of solution etc and all those "really tough" financial and marketing aspects about being a vendor & being a company - something that those engineering dropouts in their new shoes as executives were horribly incapable of and unprepared for. mismanagement apart, they totally bungled in selling themselves and their company.

the market kicked (and is still kicking) the butts of such startup companies, kicked them hard, by asking them to be cost effective, more features for less money, show enough finances to last to eternity etc.. just go try asking around how many of these 'Tera' variations of companies that are around if they still doing anything in the terabit range that's not vaporware!

but a few have survived. and a few new players came in with solutions. let's see who makes it to the end, and with what technology.

btw, dont waste keystrokes reacting to Bobby's ramblings or justify with him. I repeat: "Don't argue with idiots, they drag you down to their level and then beat you with experience."
RoutedWorld 12/4/2012 | 11:46:29 PM
re: ZettaCom Lands $19M
drone387 wrote:

> communication boxes aren't a mass volume
> industry, except for Cisco possibly. While
> Cisco may get the volume price break, you
> aren't.

I agree that communications boxes aren't a mass volume as compared with PCs, VCRs, etc...

But can you explain to me why a company like Cisco thinks they have develop switch fabrics for every box it builds? What they usually do is use the "Fear" factor to justify decisions. Your statements support this:

> Thus, you are supporting a design team,
> one you don't control. Also, if you select the > wrong product or vendor, you are up the creek

Yes people have made mistakes. Do you think Cisco has never trashed internal chip sets? Hummm, what was the name of that switch fabric company they purchased back in 2000 and then canceled the product?

rs50terra 12/4/2012 | 11:46:29 PM
re: ZettaCom Lands $19M BobbyMax,
You are wrong again. As usual.
Developing a Switch Fabric is not trivial, as anybody in this business will tell you. It takes a couple of years' work by some good engineers and it costs a few million bucks.
If you want to enter the very competitive packet switching market quickly and reduce your development cost in the process, you will probablly consider using merchant silicon.
drone387 12/4/2012 | 11:46:33 PM
re: ZettaCom Lands $19M "It's a numbers game, and all about economies of scale. In the end, off-the-shelf always wins. Every mass industry, which communications have become, converges on that basic principle. "

I think BobbyMaxx's main point is that communication boxes aren't a mass volume industry, except for Cisco possibly. While Cisco may get the volume price break, you aren't. Thus, you are supporting a design team, one you don't control. Also, if you select the wrong product or vendor, you are up the creek (aka Mahi a couple years ago). Tradeoffs, Tradeoffs, Always Tradeoffs! Why can't I have my cake and eat it to?
Sisyphus 12/4/2012 | 11:46:36 PM
re: ZettaCom Lands $19M > .. To cut down the cost, many equipment
> vendors will implement their own switch fabric.

The whole point flew right over your head. Buying off the shelf saves an enormous amounts of R&D. That is if the off-the-shelf product delivers on all the requirements you had set for the internal development anyhow.

It's a numbers game, and all about economies of scale. In the end, off-the-shelf always wins. Every mass industry, which communications have become, converges on that basic principle.
BobbyMax 12/4/2012 | 11:46:38 PM
re: ZettaCom Lands $19M There are over a dozen switch fabric companies and as the article points outsome of them closed down. Inspite of closure, it is still very crowded space with little or no proftability.
With the declining Telecom Market, there is not much need for switch fabric products. To cut down the cost, many equipment vendors will implement their own switch fabric.
sandemon 12/4/2012 | 11:46:51 PM
re: ZettaCom Lands $19M I think you mean GSR 12000
Sisyphus 12/4/2012 | 11:46:59 PM
re: ZettaCom Lands $19M No good market is uncontested these days, it seems. Let's wish them all luck, because networking surely needs a more cost-efficient product development model going forward, and these companies might well contribute to it.
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