Ethernet access box maker scores funding

FRAMINGHAM (01/13/2004) - To say that World Wide Packets Inc. has been quiet of late would be a huge understatement, but the Ethernet access equipment maker is ready to make some noise, starting with news that it has received a third round of venture funding.

The Spokane company's announcement that it has added US$15.7 million in funding to the $90 million it collected previously was its first formal press announcement since April and only its second since December 2002.

Officials of the four-year-old outfit acknowledge that they've had their heads down trying to get its financing done, which they say should bring the 63-person company to cash flow positive by early next year at the latest. The privately-held vendor more than doubled revenue from 2001 to 2002, then increased revenue a disappointing 40 percent in 2003 over 2002 during "the depths of the telecom trough," as CEO and President David Curry put it.

The funds, supplied by new investors Madrona Venture Group and Northwest Venture Associates as well as several earlier ones, will be put toward boosting the company's sales and business development, building partnerships, plus product development. The company has also hired a PR firm to get its name out in public more.

To date, World Wide Packets has sold much of its gear into municipalities in the Pacific Northwest that are setting up their own telecommunications networks in an effort to spur economic development. One such community, Grant County in Washington, serves 5,000 subscribers with 1G bit/sec bandwidth to the premises, Curry says. The company also sells into utilities that are taking on incumbent carriers.

"I've spent 30 years in telecom and I've never seen anything like the potential of what municipalities and utilities can do in this country in terms of reshaping the telecom landscape," Curry says. "It really has the attention of the incumbents."

While the company is short on household name customers in the U.S., its equipment is used by two big cable service providers in the U.K. as well as a number of other overseas network operators. Overall, World Wide Packets claims to have its gear in more than 30 networks. It competes with vendors big and small, including the likes of Atrica, Cisco and Extreme Networks.

Customers the company would really like to have are the RBOCs, but CEO Curry says he has been frustrated with their adoption of or leanings toward passive optical network (PON) technology to solve last mile bandwidth bottlenecks.

"We believe (Verizon) has made a mistake in terms of the passive optical network architecture they have selected," he says. "It's a mystery to us why they wouldn't put in an active Ethernet solution."

The concentrators and customer premise equipment making up World Wide Packets' end-to-end LightningEdge portfolio are based on active, or powered, Ethernet technology. In its presentation accompanying the funding announcement, the company warns that it will be "highly vocal" on the active vs. passive technology debate this year through industry forums and other outlets. Curry argues that active is better than passive for a number of reasons, including that it is more scalable and works over longer distances. He also chides the PON market for its lack of standards.

On the product development front, World Wide Packets plans to bring technology to the U.S. that is already used overseas to support carriers' business services carried over MPLS and other advanced networks. Curry, who previously co-founded OSS company Architel and sold it to Nortel, is also emphasizing improved OSS capabilities in World Wide Packets' offerings to support service providers' billing and provisioning needs. In addition, the company is working to enable its products to work with more legacy gear in service provider networks.

Curry says that with the telecom industry appearing to be on the upswing, World Wide Packets is well positioned to grab new business, including with LECs and IXCs.

"Every carrier is at some stage of looking at MPLS, overlaying it on their ATM/frame relay networks and offering MPLS-based VPN services/transparent LAN services to business customers," he says. "We are exceedingly well positioned to participate successfully in that marketplace."

Matt McIlwain, managing director at Madrona Venture Group and a new member of World Wide Packets' board, says his firm has been watching the vendor for three years. Madrona decided to invest because the company has "proven technology that really delivers a broadband triple play service (voice, data and video) to the end customer" and because World Wide Packets got to market early, he says.

The company was founded by Bernard Daines, who earlier in his career started Packet Engines, a maker of Gigabit Ethernet switches that was acquired by Alcatel in the late 1990s.

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