Las Vegas - And so we met again.
Six months after hosting CEOs from five Gigabit Ethernet start-ups for dinner in Silicon Valley to discuss the state of the market, Network World recently reconvened the Gigabit gang for an industry update.
This time we chose as our setting Piero's Italian Cuisine & New England Fish Market, a favorite spot among Las Vegas locals, where the conversation jumped from how quickly Gigabit Ethernet products have emerged to predictions about whether the upstarts will be acquired and hit certain revenue numbers.
Although the names of the entrepreneurs on our guest list had not changed since the last time, their companies certainly had. Last we met, not one of the companies was delivering products, but all five companies represented had products to show at the recent NetWorld+Interop 97 show here.
Prominet Corp.'s Menachem Abraham is the proud new parent of a 41.G bit/sec Cajun backbone switch, which explains why his ears perked up when our server listed barbecued Cajun shrimp as an appetizer. And Bernard Daines of Packet Engines, Inc. said his company's 1G bit/sec Ethernet network interface card is already generating revenue.
Not to be outdone, Bobby Johnson's Foundry Networks, Inc. introduced FastIron switches and NetIron switch routers that boast quality of service (QoS) capabilities, while Joe Kennedy's Rapid City Communications rolled out its FIRST family of devices that can switch or route more than 7 million IP packets per second. In addition, Gordon Stitt's Extreme Networks, Inc. introduced a line of Summit switches - complete with purple paint jobs - that provide wire-speed switching and routing, along with policy-based QoS.
The products are big news, but the even bigger story is that the companies have completed successful interoperability testing with their prestandard products.
"In the last couple of months, this market has really come together," Abraham said. "It's been relatively easy. We just hooked up our products and they all worked together."
"We're barely a year into it, and more than 20 companies are interoperating in the [Gigabit Ethernet Alliance] booth. That's a phenomenal accomplishment," added Stitt, who curiously selected two bottles of a 1995 Pinot Noir called Acacia, the same name as a Gigabit Ethernet vendor not on the guest list.
The conversation was fast-paced throughout the night, though it was stopped cold at one point when someone in the room next door uttered the words "overloaded routers." That term brought a smile to each CEO's face.
Aside from patting themselves on the backs for their new products, our guests also shared fresh financial information. All of the start-ups - with the exception of Foundry - bragged that they are on their second round of funding. The companies combined pulled in about $44.5 million in second-round venture funding, adding to the more than $30 million raised in their initial rounds.
A less formal method of measuring how far these vendors have come was the shift in dinner attire. Three out of the five men shamelessly donned the latest in "vendor wear." Johnson and Stitt sported polo shirts adorned with their respective company logos (Stitt's was complete with Extreme's URL across the back), while Daines wore a canary-yellow tie dotted with Packet Engines' trademarked trains.
In general, the conversation had more of a friendly tone than we bloodthirsty reporters would have liked, but the CEOs acknowledged that they have started to encounter each other's company's on sales calls. That means it's only a matter of time before sparks start to fly.
As it was, our guests' competitive natures began to surface anyway. Bets flew back and forth across the table in our small, private room - complete with a built-in wine rack on one of the wooden walls - as to whether or not any of the Gigabit Ethernet gang would be gobbled up.
"I don't think there will be the same acquisition binge as there has been in the past [in the Fast Ethernet market]," Daines said, as he sliced into his filet of salmon. "The big guys like Cabletron, Bay, 3Com and Cisco are all doing their own thing for the most part."
But not everyone agreed. "I don't think everybody on Bernard's list of vendors doing internal development is necessarily gospel," Kennedy said. "I'd be surprised if there weren't acquisitions out of the Big Four, and I'd be very surprised if all five of us are still here in six months."
The members of our party also challenged each other to hit high first-year revenue marks. They agreed that any vendor that reaches the goal of $24 million - the same number hit by LAN switch maker Xylan Corp. in its maiden year - will help foot the bill for our next Gigabit Ethernet dinner. That's an offer we gladly went along with since Network World funded this and the previous feast.
Customers will come
Of course, revenue means customers, so we asked our guests just how many customers they figure will actually deploy Gigabit Ethernet gear in coming months."All of us will have substantially north of 50 customers [by October]," Johnson said, raising his voice over Frank Sinatra's version of "It had to be you," which was piped into our room. "We've only had a sales force onboard for a month, and already we have 40 requests for beta."
In fact, the entire table seemed confident customers would choose their products over ATM switches.
"ATM running at 622M bit/sec costs about $10,000 per port," Abraham said. "And here we are with 1G bit/sec Ethernet selling for about $2,500 per port." Actually, FORE Systems, Inc.'s 622M bit/sec ATM per-port pricing ranges from $3,000 to $9,000, depending on configuration, but that's still higher than Gigabit Ethernet.
And Gigabit Ethernet prices are sure to drop. Daines predicted that in one year, pricing for a Layer 2 Gigabit Ethernet switch will be about $1,500 per port, while a buffered distributor like the one his company is offering will cost about $500 per port.
"Cost per port for Gigabit Ethernet will be important at the end of the day," Daines said. The rest of the group, however, downplayed the significance of Gigabit Ethernet repeaters after Daines made an early exit from the room.
Also, they noted that price isn't the only factor that will drive Gigabit Ethernet demand.
"There is a whole move into Layer 3 switching and wire-speed routing that is having a big impact on network infrastructure, and ATM introduces a lot more complexity [than Gigabit Ethernet]," Stitt said. "Also, the ATM guys have always used QoS as a stick against us, but that's a lot of baloney now that many start-ups have introduced those capabilities [on non-ATM products]."
With the first big wave of Gigabit Ethernet switches due out this summer, it won't take long to get a read on just how successful the new market - which has been projected by Menlo Park, Calif.-based consultancy Dell'Oro Group to reach $980 million in worldwide revenue by the year 2000 - will become.
And so the group will reconvene at the fall NetWorld+Interop show in Atlanta to recap the year. The question then will be: Who's picking up the check?
News Director Bob Brown contributed to this story.
