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Nokia buys Ipsilon for $120 million

The once proud start-up that, in the past, framed the debate on ways to send traffic based on IP may have succombed to the strain of taking on Cisco Systems.

Taking on Cisco Systems (CSCO) is no easy task, and once proud start-up Ipsilon Networks may be feeling the strain of such an undertaking.

The company that once framed the debate on ways to send traffic based on IP--the network transport protocol for the Net--to its destination was plucked today by Finnish mobile telephone giant Nokia for $120 million.

As recently as May, Ipsilon insisted its plan was to take the company public and build it up through high demand for IP-based networking equipment.

Such is the life for a combative start-up hell-bent on taking on the 800-pound Gorilla of networking, according to industry pundits.

"I think Ipsilon, in a sense, caused their own demise--so religious," Craig Johnson, an analyst with Dataquest, said. "I don't think any start-up has targeted Cisco and won."

Now the company faces an uncertain future as the data networking cog in Nokia's vast telecommunications holdings. Nokia has held a minority interest in Ipsilon since June.

Nokia said its intention in purchasing Ipsilon is to expand the company's role in the booming American data networking market. Sunnyvale, California-based Ipsilon's more than 100 employees will be subsumed into the telecommunications arm of the Finnish company.

Ipsilon's president and chief executive, Brian NeSmith, will continue to oversee the Ipsilon side of Nokia's business. The company will remain in its Sunnyvale headquarters.

John Carosella, Ipsilon's vice president of marketing and business development, said the company saw an opportunity to expand into the wireless data networking space and could not pass on the chance to take advantage of Nokia's multibillion-dollar backing. "Sometimes you can keep your blinds on and go after the same old, same old," he said.

With the word "convergence" on the tips of many tongues in the networking industry, Nokia's play for a broader role in the data networking market--and the accompanying marketing muscle of an $8.5 billion firm--could be a boon to Ipsilon's IP-over ATM (asynchronous transfer mode) line of networking products.

But the anti-Cisco bluster of Ipsilon's past may largely be silenced as the remaining members of the company's engineering team grow more and more comfortable within the corporate structure of Nokia.

Ipsilon executives admitted the days of Cisco bashing are over. "I think we will continue to push innovation in the space," Carosella said. "I don't think we'll be taking an adversarial role with Cisco.

"In the end, customers didn't want that from us anyway. They wanted us to solve their problems," he added.

Cisco was forced to respond to the IP-based switching craze, developing a next-generation router for high-end service provider accounts that appeared this spring and floating a concept called "Tag Switching" last fall that is currently being debated within the Internet Engineering Task Force.

Now Cisco may have the last laugh.