Feast or Famine?

     Santa Clara, Calif.
     Introductions weren't necessary.
     The five Gigabit Ethernet industry pioneers Network World hosted for 
dinner last Tuesday night here were quite familiar with one another from 
past network industry battles. And they're sure to be seeing lots more of 
each other in the months ahead as they promote The Next Great LAN 
Technology.
     Our premise for the gathering at Birk's, a popular Silicon Valley 
eatery, was simple. Unite a handful of Gigabit
     Valley eatery, was simple. Unite a handful of Gigabit Ethernet 
upstarts and supply them with food and drink in exchange for letting us 
eavesdrop on the conversation - a fast-paced discussion that wound up 
dancing from how to penetrate the installed base of No. 1 enemy Cisco 
Systems, Inc. to whether or not they will all be acquired by this time next 
year. 
     We invited Prominet Corp.'s Menachem Abraham, Packet Engines, Inc.'s 
Bernard Daines, StarRidge Networks, Inc.'s Bobby Johnson, Rapid City 
Communications, Inc.'s Joe Kennedy and Extreme Networks' Gordon Stitt. They 
all accepted swiftly - and not because they needed a free meal; their 
companies combined have reined in more than $30 million in venture capital 
on the promise that the market will grow to $2.9 billion or more by the 
turn of the century. Rather, they just like to gab about Gigabit Ethernet.
     'There's just no compelling reason to use [ATM] cells in the backbone 
anymore. Gigabit Ethernet is the obvious choice,' said Kennedy, raising 
his voice to be heard above the din around us. We'd asked for an 
out-of-the-way table so we could tape the conversation to ensure accuracy, 
but found ourselves seated smack in the middle of the restaurant.
     Despite the noise, Stitt heard Kennedy's message and agreed.
     'For the first time, we have a consistent desktop-to-backbone LAN 
technology, which makes internetworking a lot simpler,' he said. 'In 
fact, companies like Cisco have survived based on complexity, and now we 
[Gigabit Ethernet players] will thrive because of simplicity.'
     The conversation's tone was definitely more friendly in nature than we 
had hoped for, but that probably should have been anticipated since our 
guests didn't have much to argue about yet; their products aren't due till 
next year. But it didnt take a second bottle of Silver Oak Cabernet 
Sauvignon for them to begin posturing vs. existing network equipment 
vendors.
     'The big guys are doing what I call the wart strategy: Offering 100M 
bit/sec [Ethernet] switches with a gigabit pipe sticking out of the them,' 
Stitt said. 'Smaller players can build higher capacity switches from the 
ground up that
are better designed to support Gigabit Ethernet.'
     Others pointed out that the larger vendors' customers are ripe for the 
taking. 'I look at the installed base as a potential buyers list,' Daines 
said.
     Also, Stitt said that contrary to what Cisco wants the industry to 
believe, customers are open to deploying products from more than one 
vendor. 'It's total baloney that customers only want to buy from a single 
vendor,' he said. 'If that were the case, we wouldn't rely so much on 
standards for interoperability.' Stitt added that no market relies more on 
standards than the LAN industry.
     In fact, Kennedy claimed that many customers aren't very happy with 
internetworking giant Cisco right now. 'Cisco traditionally told people 
how to solve problems. But now they'll give users any technology they want 
and are no longer providing leadership to the customer.'
     The Gigabit Ethernet vendors made clear that theirs is not a routing 
vs. switching issue, either. Sure, they will supply switches that run 10 
times faster than Fast Ethernet switches, but many of them will also tackle 
routing to ensure that high-speed switches don't overwhelm the WAN.
     'There's no question that traditional processor-based routers cannot 
scale,' Abraham said. 'But we can't build completely flat networks, so 
some form of routing will find its way into these switches.'
     Kennedy concurred. 'People will be doing a lot of routing,' he said. 
'Maybe not full-blown routers, but certainly a lot more than just 
bridges.'
     In fact, Johnson said the next generation of routers will be much less 
expensive than their pricey predecessors. 'There will be a new class of 
routers that break from the traditional router pricing model of 10 to 20 
times more expensive than a switch,' Johnson said.
     While the start-ups have big ambitions, we wondered how many of them 
will get to realize their dreams before getting snatched by a larger 
company or squeezed out of the market. One Gigabit Ethernet upstart - Andy 
Bechtolsheim's Granite Systems, Inc. - was already gobbled up recently by 
Cisco for an amazing $220 million.
     'Coming from Centillion [which was acquired by Bay Networks, Inc.], I 
can tell you that we went to the movies and didn't like the ending,' 
Johnson said, referring to the acquisition route. Like his dinner 
companions, Johnson claimed that he would much prefer to go public than be 
acquired. He did, however, admit that anything is for sale for a big enough 
check.
     Abraham insisted that it is possible to go it alone. 'There will be 
some long-term survivors,' he said. 'And competent small companies will 
be successful and make their mark in this industry.'
     But when asked if the group were to meet again in a year what the 
chances would be that everyone would be with the same company, Kennedy 
replied: 'Negligible.' On top of that, he predicted that at least one of 
the five companies would be acquired.
     Kennedy also said that by next year, each surviving vendor would be 
able to bring five customers along to dinner. To which Johnson, sipping a 
double espresso, said, 'We should have 500 customers.'
     The entire table liked his numbers.
     Instead of waiting a year, the group decided that it might make more 
sense to get together instead at the spring NetWorld+Interop show in Las 
Vegas. Johnson said that show promises to be the most exciting edition of 
NetWorld+Interop in five years. 
     'But maybe we should make it breakfast,' Daines said. 'Just in case 
any of us has egg on our face.'