Silicon Valley veteran taps know-how for new projects

Silicon Valley veteran Judy Estrin has seen it all.

From her roots in the networking industry as a co-founder of Bridge Communications in 1981, Estrin's career has stretched across many of the most significant trends in the high-technology industry. From the growth of small-business networks, to alternate computing devices, to multimedia, Estrin, 46, has along with husband Bill Carrico, 50, pegged opportunities and hot technologies at their earliest stages.

When her last venture, Precept Software, was purchased by industry behemoth Cisco Systems in 1998, that company's chief executive, John Chambers, jokingly said he bought the company as much for Estrin's expertise as for the technology. Now, after a two-year stint as Cisco's chief technology officer, Estrin has returned to her start-up roots, founding a Menlo Park, Calif.-based company called Packet Design--made up of about 20 researchers and developers at the moment. The company expects to make public the first fruits of its work in the first half of next year.

Packet Design started with three ideas but has expanded its plan to incorporate five. The company will turn those technology concepts into actual companies, with their own executive staffs. With that work, plus Estrin's continued presence on the board of directors of Sun Microsystems, Disney and Federal Express, her plate, as usual, seems to be full.

With the telecommunications market in the midst of a huge shake up, Cisco having one of its more challenging years with a depressed stock, and a dot-com depression settling on Silicon Valley, Estrin took some time to tell CNET News.com what she's been up to, where the industry is headed, and how she views Cisco.

CNET News.com: There's been a lot of publicity surrounding a shakeup in the communications industry. What should we make of it?
Estrin: This is characteristic of broad-reaching change that we knew the Internet was going to create. My sense is we almost went too fast into some things and that's why it's shaking up a little harder. We went so quickly into buying into this whole move into the New World and convergence that I think some companies got ahead of themselves. There were concepts that are good concepts that maybe we hadn't solved all the problems on.

If you look at the last two years, there were a lot of people moving very, very fast and, again, some of them were making the assumption that the capital markets would always be easy. It has to absorb all this change and while its absorbing it, it may look like complete chaos, and it may emerge from it with a new set of leaders. Some of them will be Old World companies and some of them will be New World companies. I don't think it's the case that just because someone was a leader in the Old World that they can't emerge from this, but I also don't think all of them will.

So what is this shift in your career about, from a high-ranking executive at one of the most successful large companies in the world to the chief executive at a start-up that spins out companies?
I had done some thinking about how to solve some of the Internet's problems within a company like Cisco and came to a conclusion that these areas needed the type of focus that a standalone company could provide. Bill and I thought about what we wanted to do and said, "OK, how do we create an organization that can focus on technology with a longer-term perspective than most of the start-ups out there today?" Start-ups used to go for five years before they went public, now they go for two years before they go public. So they do a lot of innovation the first two years, but then they get in this short-term cycle.

One of the problems with looking long term is you're not grounded. We wanted to be somewhere in between. We wanted to focus on some problems with a little bit longer-term view but still be practical and applied.

So the first premise is you don't go public, because being public is what caused that (short-term thinking). And the second thing is we didn't want to get bought. So what we constructed was a company that worked on technology and spun out companies to make products based on that technology. Then those companies can go public and Packet Design employees can benefit and have a return on equity, and those companies can get bought. It kind of allowed us to be a perpetual start-up.

Next: Ideas fueling Packet Design, Cisco's strategy and more 

So you're an incubator?
The difference with an incubator is an incubator incubates other people's ideas, typically. We are a technology company. We are creating the ideas and taking them through prototype, working with the customer so we stay grounded, and then if it's something viable we'll either license the technology directly to a large company or we'll spin off a company. It then may need to be incubated. So it's not a traditional incubator.

What's an example of an idea?
There are some things in the routing area that we are doing, which I'm not going to talk about in more detail.

Are you trying to route information faster? Or in a more sophisticated way?
One of the problems is that a lot of the development work has gone into switching vs. routing, and originally that started because switching was faster. But there are places where routing is better, and what happened is we kind of got into this cycle of enhancing switching and a lot of the work in routing stopped.

Of the projects today, some of them are in routing. We have a project in the mobility market. The security area is another place where there's some interesting things going on.

Do you feel comfortable in this environment after working at the Cisco juggernaut?
Oh, yeah. I feel like I've gone home again. It's funny, I was just talking to somebody and they said, "So your background is from Cisco?" and I said, "No." I think of Cisco as an interlude in some ways.

It's the lone big company that you've worked for.
Yeah, and it was a very interesting experience. The growth of Cisco during that time was just phenomenal. I don't know if you're an exercise person or have ever worked out with a personal trainer; they're always changing your exercise routine because you're supposed to use different muscles at different times. I feel like at Cisco what it did was exercise different muscles in terms of my skills. A lot of the skills that it took were things that I'd built up over the years but I was using them in different ways because of the size of the company, and the difference between being a CEO and being a CTO is just a very different job.

It wasn't so much big company vs. little company for me as much as going from CEO to being a CTO, which is very much especially at Cisco an "influence" job and not a direct line of business kind of job. I'm used to having a vision, having a passion for that vision, and then going and making that vision happen. One's ability to do that when you're kind of working across (several businesses within a company) is less than when you're building a team and making it happen.

What if a venture capital firm calls and wants you to lead the next hot optical networking start-up?
That's not what motivates me. I like to work on interesting things, and I certainly think that optics is a really interesting area and, as I said, some of the things we're doing apply to optics. But I'm not the kind of person to go chase after the latest fad so much.

It's a question of what you're looking to do. At this point in our career, what we're looking to do is build a team that we enjoy interacting with, solve some real problems, and build an environment that we can continue to lead and develop new things. We're not doing it for the hype.

What drives your career in technology?
I realized very early in my career that I don't like technology for technology's sake. The very first project I worked on, called Z-net--the first local area network, Z for Zilog (an early networking company)--never went anywhere because there was no marketing department. Zilog didn't know what to do with it and didn't know where to go with it. I learned then that what I really liked was applying technology to solve real problems. I found it very frustrating when some of the people I worked with said, "Who cares?" This was interesting; we did something interesting. To me it's interesting when I see somebody use it.

The whole idea here is to solve some real problems. The analogy I've used with a lot of people is if there's a crack in a wall, you can hire a painter, and the painter will paint over that crack, and if it's structural, it's going to come back in three months. A lot of what's being done on the Internet today is painting over the cracks. In order to fix it, you need a structural engineer who really understands the root cause of the crack. If the engineer is really good he or she will figure out how to fix it without knocking down the wall. That's the analogy I like to think of with Packet Design.

Is Juniper Networks a structural engineer?
I think Juniper and Cisco. There are some areas where a Cisco or a Juniper are doing exactly the right things. There are other areas where I think both companies are using technology that does not have the scalability that is needed, and they don't have the resources and the focus or the viewpoint to fix it. What we would like to do is demonstrate that some of these things can be done in a different way. The things we're doing are complementary to what both Cisco and Juniper are doing.

Now that you are on the outside looking in, what are the challenges facing Cisco?
I'll say the same things that I said at Cisco, and that is the company's momentum is incredible. The company's culture, in terms of reacting to the customer, is very integrated, as a company, and is certainly a hallmark of its success.

Does Cisco's strategy to be all things to all people--or end-to-end, as Cisco chief executive John Chambers likes to call it--still work?
The classic challenge Cisco has at every stage is: Is there a point at which you grow too fast? Sun Microsystems has to deal with this issue too. What is the point where you are right at that edge and growing as fast as you can while still making sure you've got the right foundation and the right controls in place?

I don't necessarily see a trigger point or shift in the market right now that puts Cisco at a disadvantage, but I do believe that in this end-to-end argument you have to be good enough. It's not an excuse not to have good products.

It sounds like you felt the need to slow down after your time at Cisco.
Internet time. There's a lot of positives but the one negative is no one is taking time to think. You just go so fast and can get so reactive that you don't always have a chance to think through what the implications are.

On a larger scale, does that have implications for Silicon Valley?
I think it's part good, part bad, right? The Internet economy and Internet time and everything that is going on--How can you say that is bad for Silicon Valley? The growth, the ideas. It has negative side effects that can be bad if we don't pay attention, which is, the industry can get too short-sighted and too reactive.

It all comes from the fact that the stock market today is momentum driven, not long-term fundamental driven. The same way salesmen follow their comp plan, public companies are driven by what's going on in the stock market. Your job as a company is to do good by your shareholders.

If you have a stock market that is rewarding short-term momentum, you become very short-term focused, and again, there's a lot of positive things about such momentum, but there's some negative implications, specifically from a technology perspective. If you're not laying the foundation correctly on the technology, you can end up in a situation where you have houses built on a poor foundation.

Does this jibe with your philosophy?
I was listening to a CEO talk at a conference right after we started Packet Design, and he said something about taking a certain action, even if you didn't feel good about it. He said, "You know, when a herd's coming by, you either jump on top of it or you get crushed by it." And I listened to that and I said, "No, there's another choice: You can just step out of the way."

And I think that Bill and I, in watching this herd, just said, "You know what? We're going to go do it our way and step out of the way, because we believe this herd will pass, and then there will be a new herd with different criteria."