Another set of moves is expected this week in the rapidly developing market for gear that can turn metropolitan area networks into high-speed on-ramps to the Internet.
Redback Networks became the latest equipment company to enter the metro fray today, announcing plans to ship in the third quarter new technology acquired from Siara Systems, the company it bought last year for a hair-raising $4.5 billion.
Redback is hoping to extend its network expertise from high-speed, or "broadband," connection equipment and subscriber management systems to the metro "ring" networks that Redback's residential links tap into. Siara makes technology that ties older metro networks to new Net-based services, speeding the plentiful fiber-optic connections underneath most major cities.
Many analyst firms predict the market for metropolitan area networking equipment could reach approximately $5 billion within five years. "If you look at the growth potential in this market, it's going to be a huge space," said Andrew McCormick, analyst with industry consultants The Aberdeen Group.
Riverstone Networks, one of four planned spinoffs of Cabletron Systems, is also expected to launch plans for metropolitan networks, dubbed the RS product family, this week. That technology is already shipping to customers, according to Romulus Pereira, chief executive of Riverstone, and the flurry of metro activity only "legitimizes" his company's strategy, he said.
Another optical networking company, ONI Systems, may test the public offering waters on Wall Street this week after delaying its stock float a week ago.
The moves follows rumors that telecommunications equipment giant Lucent Technologies is in talks to acquire metro start-up Chromatis Networks in a deal thought to be worth more than $5 billion.
Cisco Systems, looking to expand into optical-based metropolitan gear, plucked a Swedish maker of metro gear, Qeyton Systems, earlier this month for $800 million.
Redback is hoping to take advantage of its existing audience by extending its franchise to metropolitan areas using the so-called SmartEdge equipment. When the company purchased Siara last year, industry insiders wondered if a $4.5 billion acquisition for a company with no revenues or customers could ever pay off. But given recent telecommunications network operator trends and the moves of competitors, some now believe it was the right move.
"They have a lot of relationships already," said McCormick. "Many times that is the key to winning business."
Redback executives said three customers are testing the Siara equipment: Qwest Communications International, Genuity and Cistron, a Netherlands-based Internet service provider. The company said the Siara gear will help communications carriers reduce their capital and operational expenses by tying into their current networks while allowing them to use cutting-edge Net technology.
"Their costs are too high," said Vivek Ragavan, chief operating officer at Redback.