Acquisition heats up super-router market

Several large makers of telecommunications equipment and start-ups last month geared up to supply tomorrow's high-speed carrier networks, and Lucent led the way with a major acquisition.

The giant maker of traditional voice equipment agreed to buy start-up, Nexabit Networks, for about $US900 million, filling out Lucent's product line with a massive router that is now in beta testing at several service providers.

Additionally last month, rival Nortel Networks severed a business relationship with another new router maker, Avici Systems, and super-router start-up, Juniper Networks, saw its initial public offering balloon on its first day of trading.

The Nexabit deal will be accounted for as a pooling of interests, the second major acquisition of this type since October, when legal restrictions in the wake of Lucent's spinoff from AT&T were lifted. Last month the company completed its purchase of remote-access and WAN switch maker, Ascend. Lucent expects the Nexabit deal to be completed by July 31.

Nortel and start-up, Avici, also ended a relationship under which the carrier supplier distributed Avici's massive routing switches to service providers. Nortel will keep its minority ownership stake in the company.

"This is very complementary to the buying of Ascend, and it increases [the company's] ability to threaten Cisco in the ISP space," said Dave Passmore, an analyst at Decisys.

Nexabit is developing an IP routing switch with a capacity that can scale as high as 6.2 terabits per second and transport packets over interfaces as large as OC-192 (10Gbps). The platform, called the NX64000, can interface directly to a dense wave-division multiplexing infrastructure that carries multiple streams of traffic as different frequencies of light. It is in beta testing at several service providers.

The acquisition would bolster Lucent's bid to build the next generation of service-provider infrastructures, which will be designed to handle both voice calls and fast-growing volumes of data traffic on a single network.

Analysts said high-speed routing switches will play a critical role in future carrier networks, though the core of those networks may take the form of fully optical circuit switches now under development at Lucent and Nortel, as well as start-ups such as Sycamore Networks and Monterey Networks. Cisco is creating a higher performance version of its flagship 12000-class router, code-named the 12000 Plus, and is also expected to compete in terabit-speed routing.

Passmore said there is likely to be room for a variety of devices in next generation networks. Together, they may create a glut of bandwidth that spells much lower communication costs for enterprises.

Analysts said Avici's electronic platform could be made irrelevant by devices, such as the Nexabit NX64000, that can fit more easily into optical networks. Amid the confusion over technical approaches, enterprises should be planning the types of services they may need and demanding them from carriers, analysts said.

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More about AscendAT&TAvici SystemsJuniper NetworksLucentNortel NetworksSycamore Networks

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