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Networking start-up Avici gains shot in the arm from Enron

The telecommunications carrier announces plans to use Avici's high-end networking equipment in its fiber-optic network upgrades and take an undisclosed equity stake.

Start-up Avici Systems hopes the networking market can handle another speed demon.

North Billerica, Mass.-based Avici seems poised to deliver on long-promised networking equipment and software intended to route Internet traffic at high speeds, with its technology passing the testing stage and ready to be used in production networks, according to company executives.

This week, the company got a stamp of approval from Enron Communications. The telecommunications carrier announced plans to use Avici's high-end networking equipment in its fiber-optic network upgrades. Enron will also take an undisclosed equity stake in Avici.

Avici aspires to tackle the same market that competitors Juniper Networks, Cisco Systems, Nortel Networks and Lucent Technologies, among others, are salivating over. Telecommunications companies are increasingly turning to cutting-edge Internet-based equipment to upgrade their networks, in order to handle an explosion in network capacity needs.

Avici is also one of several "terabit" networking start-ups hoping to fill the high-end equipment needs of entrenched communications companies like AT&T and MCI WorldCom, as well as newer entrants like Global Crossing.

"They're making a strong bid," said Chris Nicoll, director of infrastructure analysis at market watcher Current Analysis, who believes Avici's Enron gains will largely be at the expense of Cisco.

The market for high-end switching and routing equipment is expected to reach $5.5 billion by the year 2003, according to market researcher Ryan Hankin Kent. While some networking gear makers already have working equipment ready for the nascent market, others--such as Siemens' Unisphere Solutions arm, start-up Pluris and a slew of other aspirants--are still wrangling with the technical details.

"We're past the testing stage of the first release of the product," said Surya Panditi, chief executive at Avici.

Analysts say Avici's latest steps bode well for the future. Enron's network upgrade initially was to be powered largely by Cisco and optical player Ciena. Since Avici has added itself to the equation, it seems clear that Enron wants a high-speed alternative.

Avici's announced roster of customers testing its equipment now includes Williams Communications, Deutsche Telecom and GST Telecommunications, as well as Enron. Others have not been disclosed, according to the company.

John Griebling, Enron's vice president of network operations and engineering, said that "no one is even a close second" to Avici's technology in terms of performance, capacity and software systems. Avici will be used in Enron's network "core," with Cisco equipment constituting the Internet-based access portion of the scheme, he said.

Enron hopes to complete its network upgrade by the third quarter of this year.

To date, it has been a wild ride for Avici. The company announced early last summer that it would no longer partner with Nortel Networks for marketing and distribution of its technology, in order to separate itself from the Canadian giant. Nortel retained its stake in the firm, however.

That move was part of a whirlwind of activity in the industry at the time, which included the acquisition of competitor Nexabit Networks by Lucent and the runaway public offering of Juniper, another player with high-speed ambitions.

But executives believe the market is new enough to support another entrant. "It's still in its early stages of development," CEO Panditi said.

Avici, which now has about 200 employees, plans to have a public stock offering later this year, Panditi said.

In conjunction with the announcement of the Enron deal, Avici also launched a new technology feature to its Terabit Switch/Router, or TSR, that will allow a communications company to offer more or less bandwidth to a customer on the fly.