Megisto: Trialing in Tuscany?

Next-generation IP data service-node vendor Megisto Systems has been in service trials with one mobile operator since June 3 and is to start trials with another before the end of July, the company has revealed to Unstrung.

But with which operators? We're pretty keen to know their identities, as such details, along with confirmation from the carriers, could catapult Megisto into the hardware Top 5 of Unstrung's Top 25 Startups.

So come on: Name some names! "We are not giving out the names of the customers at this point because there's no reason to -- why introduce them to our competitors?" says Carol Politi, Megisto's vice president for marketing, in an exclusive interview with Unstrung in London (very nice lunch, by the way -- fine fish).

And competitors abound, including fellow startup WaterCove Networks Inc., as well as more established telecom equipment vendors (see Having a Flutter on the GGSNs).

So, any chance of a hint about these carrier trialists? Major western European operators? Large customer bases? "I think there's been a trend away from using early customer engagement for public relations purposes. There is a realization in the broader market that early customer engagement is exactly that. Introducing PR into the customer process is distracting and, frankly, can prevent you closing customer deals. Trying to leverage off things that aren't closed deals yet is something we're staying away from."

In addition, Politi feels that as the company is well funded it "can focus on our potential customer base" and not have to try and attract further market attention by crowing about trials. "We have financial backing from companies with very deep pockets that understand about the time it takes to bring returns from the hardware sector." Megisto has raised $67 million to date from a number of investors.

Without naming names, though, the company is naturally enthusiastic about its current relationships. "Both trials have very concrete, tough plans and metrics associated with them," says Politi. "One of the operators has promised exclusivity around the service in a particular country for the first six months. That is a trial based on service creation for the enterprise networking environment. We feel pretty good that the customer has negotiated that. It means they are serious."

These trials could lead to completed purchase orders within months, she adds. "Potentially we could see revenues this year, with increasing revenue during the course of next year. You will certainly hear about revenue from us in 2003."

Keeping costs under control and resisting the urge to expand too quickly before any contracts are won is also important for Megisto, which has fewer than 100 staff, the vast majority of whom are engineers. "We didn't want to hire too many people and then find we had to get rid of some of them, like some companies have had to." Could she be having a dig at fellow data service-node vendor Tahoe Networks? (See Tahoe Confirms Cutbacks.)

So what type of carrier is most likely to be interested in these next-step mobile data systems? "Operators that launched data services early are the ones that are looking to add value in the service core now. The ones that started later will be in another cycle at another time. It takes a certain amount of [data service] uptake within the operator before they start to find that they need to add services. They have got to work through their sales cycle. If an operator hasn't provisioned a lot of customers, it is not going to identify a number of the service management issues. If it hasn’t had a lot of customers turning on their phones every day, the operator won't have seen a lot of the scale issues."

So, no carrier names revealed, yet all the signs point towards Telecom Italia Mobile (TIM), an early and enthusiastic adopter of mobile data and a leading supporter of M-Services, as a likely trialist. Megisto's most recent funding, in April, netted $5 million from Saturn Venture Partners LLC, an independent firm with a capital commitment of $280 million from investors that include Telecom Italia Mobile, Telecom Italia, and Olivetti. A telling trio. Olivetti holds a controlling stake in Telecom Italia, which is the parent of Telecom Italia Mobile.

Most interesting is this statement from Saturn's Website:

In performing technical due diligence on new investment opportunities, Saturn benefits from a strong partnership with Telecom Italia Lab, whose 1,200+ engineers provide expertise on key aspects of current and next generation architectures for wireline and wireless communications. Also, through this relationship, we introduce our portfolio companies to senior executives and other important decision makers at Telecom Italia and Telecom Italia Mobile. Since our launch in April 2001, we have found this unique source of technical due diligence and this bond with a large incumbent carrier to be invaluable to both entrepreneurs and other venture firms.

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