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AT&T

Two years into a reorganization that included the recent sell-off of debt-ridden cable operations, AT&T seems anchored in granite compared with the slippery mud in which many of its competitors - especially WorldCom - sit.

AT&T is showing particularly well in enterprise data, the future for carriers of all types. These days, companies only want to place their precious packets with tried-and-true providers - preferably those that own their own facilities. That AT&T fits that description well is starting to become apparent in the company's financials. In the third quarter, a 7% growth in data, IP and managed services helped offset voice losses enough for the carrier to declare a profit for the period.

Hosting, in particular, has become a power point for AT&T. With the crash of several hosting specialists in 2001 and 2002, including that of market leader USinternetworking, AT&T has positioned itself for growth in this business.

In January, it wrapped a homegrown, $200 million network management suite around hosting customers' Web sites, adding oomph to encourage collocation users to move up to managed services. With the suite's event-correlation functions, AT&T says, it can fix performance problems before they affect a customer's Web site. And in July, the carrier struck a deal that has Sun selling AT&T Web hosting services through its massive reseller channel. By September, it even won the contract to host one of the most-visited Internet sites, the federal government's Web portal, FirstGov.gov.

Other technology high points in enterprise data came throughout the year. In April, AT&T beefed up its voice-over-ATM management options to help enterprise users operate hybrid voice and data networks more easily, even when using a combination of ATM, frame relay and IP. In July, it announced the expansion of its global network to 20 sites beyond the original 120 planned for the year; confirmed plans to deploy new worldwide end-to-end private-line services by April 2003; and said it was "on track" for global availability of its Enhanced Virtual Private Network service. And throughout the year, it boosted its metropolitan Gigabit Ethernet network and now boasts availability in 100 cities in 38 states (although some question any incumbent carrier's true commitment to Gigabit Ethernet services - see story, "Why old data services thrive while new ones wither" ).

And, the carrier promises continued upgrades to get its network to an all-optical state. AT&T CTO Hossein Eslambolchi has been a vocal evangelist for creation of next-generation intelligent networks. He speaks of elaborate plans to make AT&T's backbone so intelligent it will run and fix itself. A lofty vision, perhaps, but one in line with the company's power stature.

Cisco

Cisco remains a gale-strength force in the enterprise market.

Illustrations by Noah Jones

For starters, the company continues to be a buyer among a sea of for-sale signs, even if it has slowed its pace of acquisitions from the dizzying frenzy in 2000. From May though mid-October, it bought five companies in stock deals valued at approximately $385 million. It gained Andiamo Systems, for Fibre Channel storage switches; AYR Networks, for distributed routing; Hammerhead Networks, for IP aggregation software; Navarro Networks, for Ethernet switching ASIC designs; and Psionic Software, for intrusion-detection systems.

The Andiamo and Psionic acquisitions, in particular, represent moves into hot market areas - storage and intrusion detection - for which Cisco set its course in 2001. Success in these, plus wireless networking, are crucial to Cisco's long-term growth.

Of course, buying a start-up always has been the easy part. Turning the acquired technology into viable products and those products into market leaders - that's another story. In IP telephony, the story is finally shaping up to be a good one for Cisco. The worldwide market for enterprise IP telephony, including IP phones, hit $171 million in the second quarter, 21% growth over the same period last year, Synergy Research Group says. Cisco's market share was 46%.

To an industrywide sigh of relief, the router chieftain posted good financials throughout the year, with a downright stellar third quarter of $729 million in net income, compared with a net loss of $2.7 billion for last year's third quarter (operating profit more than tripled). For fiscal year 2002, ended in July, the company reported net income of $1.9 billion per generally accepted accounting principals (GAAP), compared with a net loss via the same accounting method of $1 billion in fiscal 2001 (pro forma income figures vary to the point of showing a net income of $3.1 billion in 2001). And for the first quarter of fiscal 2003, which maps to the calendar's 2002 third quarter, Cisco reported net income, via GAAP, of $618 million vs. a net loss of $268 million for the first quarter of fiscal 2002.