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Megisto Adds Hundt to Board

Light Reading
LR Mobile News Analysis
Light Reading
4/26/2002

BURLINGAME, Calif. -- Megisto Systems, an equipment vendor making a "purpose-built" switch that links wireless networks to wireline IP networks, says that Reed Hundt, the former chairman of the Federal Communications Commission (FCC) (from 1993 to 1997), has joined its board of directors. Hundt is currently on the boards of Allegiance Telecom Inc. (Nasdaq: ALGX), Northpoint Communications (now defunct), Novell Inc. (Nasdaq: NOVL), Phone.com, Core Express, and Global Connect Partners. He was also on the board of Sigma Networks, a carrier that burned through $120 million in funding before closing its doors in January.

"I've known Reed for many years, and its great to have him on our board," says Gordon Saussy, Megisto's president and CEO.

Megisto's top managers, including founders Saussy and Carol Politi, hail from Ericsson AB (Nasdaq: ERICY), which they joined via Ericsson's $450 million acquisition of Torrent Networks in 1999. Torrent was a startup that built edge aggregation routers for IP networks. After a year at Ericsson, Saussy says he and Politi realized that radio gear, not Internet routers, was Ericsson's crown jewels and that they could have only limited influence on the Swedish telephone giant from their office in Maryland.

Megisto hasn't yet revealed the details on its switch. Saussy's presentation at the NGN Ventures conference here mainly focused on mobile service providers' inability to deliver and charge for customized data services. He says Megisto's equipment is analogous to how Redback Networks Inc.'s (Nasdaq: RBAK) subscriber management services box changed how wireline service providers could turn on, bill for, and terminate their customers' DSL connections.

WaterCove Networks Inc., Winphoria Networks, and Tahoe Networks are some other startups building products that tackle the same sorts of problems (see Tahoe Takes Wireless to the Edge).

What's not clear about Megisto's plan is how it intends to sell its gear to service providers. European and Asian service providers are already offering sophisticated, à la carte data services to their subscribers, so there's arguably no need for Megisto's gear there. And U.S. wireless operators live and breathe flat-rate services, and the administration of those services doesn't require the kind of high-level processing of which Megisto's gear is supposedly capable.

You have to hand it to Saussy, though: He is a tireless evangelist for the view that the services offered by all worldwide wireless networks will someday resemble what's being offered in parts of Europe and Asia. "The mobile data network is going to be a lot more sophisticated and business-driven than the commercial Internet is," he says.

Megisto has raised $67 million in venture funding (about $3 million of that is debt) from investors including Saturn Venture Partners LLC, Columbia Capital, Bessemer Venture Partners, New Enterprise Associates (NEA), Norwest Venture Partners, and private investors, such as Hundt.

Hundt is the second former FCC official on Megisto's board. The first was Columbia Capital partner Jay Markley.

What remains to be seen is whether adding Hundt to Megisto's board will make it any smarter than the group that, in the third quarter of 2000, encouraged Megisto's managers to "grow faster, hire more people, and spend more money," according to Saussy. ("We said, 'no way.' ")

Some are skeptical. "He's another former FCC guy, and they're not a carrier," says Greg Tarr, managing general partner of GT Ventures, an investment firm focused on wireless technology ventures in Asia. "[FCC guys] are the wrong people with the wrong experience for a company like that." — Special to Unstrung by Phil Harvey, Senior Editor, Light Reading
http://www.lightreading.com

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