Zhone Adds Xybridge to Its Cart

Zhone Technologies Inc. announced Tuesday it will acquire Xybridge Technologies Inc., a Richardson, Texas-based softswitch vendor that produces devices designed to replace central office circuit switches with faster packet switches (see Zhone to Acquire Xybridge).

The acquisition will be the fifth for Zhone, which aims to offer service providers an array of networking equipment products for cable, copper, and all other media -- products that are controlled by a common software management system. “All the products we have extend the high-capacity services in the network’s core to the last mile,” says David Markowitz, Zhone’s associate vice president of marketing.

“What carriers really want is a migration path to get from a pure TDM [time-division multiplexing] world to a pure packet world,” says Eric Presworsky, Zhone’s associate vice president of product strategy. “With the acquisition of Xybridge we can do that.”

Since its formation in September 1999, Zhone has bought CAG Technologies, an electronics subsystems maker; Premisys Communications, whose Integrated Multiple Access Communications Server (IMACS) provides most of Zhone’s revenues; Roundview Inc., a group of networking software engineers; and OptaPhone Systems Inc., maker of point-to-point wireless systems.

That rapid acquisition pace has caused Zhone to grow in breadth and depth, though its products won’t be generally available until next year (see Zhone Details Product Strategy). Zhone has grown from eight employees in September 1999 to about 490 just one year later.

Zhone's losses have been on a similar trajectory. As of September 30 they totaled about $157.7 million. The company filed to go public in October, but it remains to be seen if Zhone will push on into the public markets or turn to its private investors for its next funding round (see Zhone Files for IPO and McGinn Backed Lucent Competitor). Zhone’s pitch to carriers is that its integrated product portfolio makes their lives easier because all of the network’s components -- from the subscriber management system to the DSLAM to the voice-over-IP switch -- will work together well.

All the same, Zhone is fighting the stigma that its solution requires a huge upfront buy-in from carriers. “One of our biggest challenges, and one of the things we’ve been the worst at communicating, is that it’s not an all-or-nothing solution, Presworsky says. “Our gear works with third-party DSLAMs, cable modems, cable termination systems, integrated access devices, etc.”

“Having one vendor provide everything isn’t always going to work,” says Paul Singh, cofounder of IpVerse Inc., a Xybridge competitor. “With all the consolidation going on in the carrier space, even if a service provider starts with a single vendor solution, they won’t end up with that.”

-- Phil Harvey, senior editor, Light Reading http://www.lightreading.com

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