The networking venture business has retreated to its 1995 level, said Dr. John McQuillan, speaking at the opening of the NGN Ventures conference in Burlingame, California. The amount of money being invested in networking start-ups in 2002 ($21 billion) was only 20% of the peak in 2000 (equal to the 1995 level). Only 20% of investments were for seed or first rounds (equal to 1994 levels). The number of companies getting funded fell to 3,000 (equal to the 1996 level). McQuillan observed that even at these levels, a fundamental problem remains for venture capitalists. While $20 billion per year is going into the industry, only $10 billion per year is coming out in IPOs and/or mergers/acquisitions. The pace of venture telecom service investments has faced a similar drop from 2001. McQuillan warned that the situation is further complicated by an overhang of $75 billion in venture funds leftover from the peak — money that is still waiting to be committed or returned to investors. In the long run, the painful industry correction is “probably a good thing,” said McQuillan, as companies have been forced to really come to grips with a solid business model and venture capitalists have become much more selective.
Reading the tea leaves on service provider spending, conference co-chairman Dave Passmore said it is now clear that while CAPEX declines are bottoming out, future spending will be half of the peak levels. Telecom service prices are holding steady or even increasing, as in the case of Frame Relay and ATM in some regions. The broadband rollout is continuing and there is evidence that service provider networks are filling up with traffic. Passmore’s list of what’s hot in the service provider sector includes next-gen SONET, metro Ethernet, MPLS, multiservice switches/routers, core IP routers and WLAN hotspot gear. Not so hot sectors include softswitches, pure optical gear and equipment for 40 Gbps line rates. On the enterprise side, Passmore highlighted the continuing interest in “buying rather than making” and subsequent demand for VPNs. His list of what’s hot for enterprise networking includes IP telephony, network security, WLAN products, power-over-Ethernet switches, instant messaging and presence applications, CWDM for use over leased dark fiber, and products that enable a virtualization of data center resources. Technologies with longer-term horizons include Gigabit to the desktop and 10Gig trunking for enterprise backbones, although lower pricing could accelerate their rollout. Passmore noted the venture community has shifted much of its focus to enterprise-level networking solutions.
https://convergedigest.com
