Nortel hits the skids

Om has a piece today written by Venture Capitalist Allan Leinwand asking whether Canada should bail out Nortel.  He asks:  “But is preserving the country’s technological heritage reason enough to spend millions in taxpayers dollars?”

I think that the answer to the question is contained within the question.  There is no such thing as technological heritage … only a technology’s future.  Once a company has ceased to innovate with effectiveness, market forces must be allowed to run their course.

Nortel, whose turnaround CEO Mike Zafirovsky appears to be a bit of a jet-setter, was a global source of technical innovation for most of the last century, peaking in the 1980s.  Its DMS line of switches grew to become the dominant means by which incumbent local exchange carriers rolled out circuit-switched voice networks; and the means by which long-distance companies expanded their reach globally. 

This gave the company a lot of cash to throw around, chasing R&D with aplomb, but it wasn’t spent wisely and efforts to embrace IP were insincere and too little too late.  What Nortel failed to see coming was the enormous destruction of value that would occur when Voice became just another application on IP networks — and the opportunity to build massively expanded value by building new applications over that infrastructure.  Even as recently as a few years ago Nortel has been tremendously innovative, however their solutions have failed to reach into the marketplace as they were targeted at a single customer group — the incumbents — who themselves are flailing and sputtering.

They also have a broken corporate culture.  This happens when organizations get fat and lazy … and political.  I watched that culture attach itself, like a parasite, to Cisco in the late 1990s as we were hiring entire teams from Nortel and moving them to North Carolina and San Jose.

The issue of a bailout should be (but isn’t, since the Canadian taxpayer is already subsidizing the company’s operations to the tune of $30M) irrelevant:  Nortel has strong market and asset value still and should not need it.  The company suffers from the burden of expectations, both of the marketplace and of irrational shareholders; and from the criminal efforts of loathsome executives who tried to feed that beast rather than confront reality.

When AOL’s executives realized they had an overvalued asset with little-to-no real growth prospects, they limpet-mined themselves onto a depressed company with unrealized value.  That’s what Nortel could have / should have done several times in the past 15 years, but didn’t.

The chalice of innovation in telecommunications in Canada has passed on to RIM (neither of whose founders ever worked for Nortel — a rarity in the technology industry in Canada!).  Is the company wobbling simply as a casualty of the current economic cycle, or because of a deeper cancer and an endless stream of financial scandals?  Would $30M in investment be better spent on Nortel or on RIM, in the long term?

My guidance is: embrace the bankruptcy.  It’s an opportunity to restructure the business, re-orient the strategy, clear out the dead wood, and reset irrational expectations.  Nortel could yet again be an invigorating business, but shoring up the business that it is today is no way to get there.  In the meantime, Nortel has served its purpose in stimulating innovation in Canada and acting as an apprenticeship program for our country’s technology leaders.  Let it run its natural course.

It could be said that hockey is a very Canadian sport. It embodies the Canadian values of humility, camaraderie, sportsmanship, egalitarianism, subtlety, respect for tradition, and conservatism. Inside the confines of the rink, hockey players are larger-than-life: aggressive, assertive, and spectacular. Outside the rink? Not so much.

This is one of the overriding problems that plague the NHL. The personalities of the players, still mostly Canadian, make the sport hard to market because the culture of hockey players eschews taking the spotlight, grandstanding, or boasting. Players tend to walk softly when not carrying their big sticks, and this League of Unextraordinary Gentlemen makes for a lack of players with true celebrity potential.

It is an understatement to suggest that the NHL has a marketing problem. And while this blog is awfully hard on Gary Bettman (justifiably so) it’s not all his fault. Consider the story of David Beckham vs. Wayne Gretzky.

When David Beckham was imported to Los Angeles he brought more than just a bendy shot to Major League Soccer. He and Victoria Becks were soon spotted among the elite, embraced by the celebrity culture that dominates Los Angeles. This made it much easier to market the LA Galaxy and Major League Soccer in general, as each appearance in People magazine, on Entertainment Tonight, or gracing the red carpet at premieres served as a stealth advertisement for the game. This drew fans from unlikely sources. Beckham built his fame in front of the global futbol audience, transcended sport and celebrity by marrying one of the Spice Girls, and managed to remain dignified while making himself into a global brand.

Canadians still love Wayne Gretzky. Arguably the greatest player to ever grace the arenas of the NHL, his jersey number is so hallowed it is verboten to wear it — officially retired throughout the league. No player bears comparison, and his infamous move from Edmonton to Los Angeles was heralded as a break-through for the game. In fact, it was. The Kings, a basement-dwelling team before his arrival, began building a dynasty which, though it never returned a cup to LA, remained competitive and entertaining throughout his stay there. They drew in new fans, and the spillover helped the league to add teams in San Jose and Anaheim.

But Wayne is as much an admirable personality as he is a uniquely modest, humble guy. He shuns the limelight. He doesn’t want to attend glitzy parties, isn’t a trendy dresser, avoids controversy. He married a modestly successful actress, not a megastar. And as Canada’s favoured son, he carries the hopes and limitations of a nation wherever he travels. It’s an enormous burden, one he clearly feels, and one which has ultimately kept him from becoming a global transcendent brand. In many ways this is an opportunity lost. Both for Wayne and for the game he so clearly loves.

What the league needs is a cadre of players that can move the puck like Wayne — casually chucking in 50 or 60 goals a year, let’s say — while simultaneously engaging the popular media.

Sean Avery is no Wayne Gretzky. His style of play is better suited to the beer leagues than the beautiful game. But Sean has engaged the popular media and celebrity culture in a way that no player in recent memory has — and he is poised to drive interest in the NHL because of it. Within the league he’s a constant source of news and controversy, both for on-ice antics and off the ice. Within the game a great source of controversy and intrigue, and a pattern that sees shades of Brett Hull, Claude Lemieux, Shanahan, and Roenick.

But outside the arena he’s raised his game to a whole other level. Avery has had relationships or been linked romantically to a growing list of celebutantes including an Olsen twin, Elisha Cuthbert and Rachel Hunter; has made People Magazine’s “Sexiest Man Alive” list; has appeared on MTV Cribs (bragging about your bling is very non-Canadian!); was weirdly an intern at Vogue Magazine this summer; is poised to star in a fashion reality TV show; can frequently be seen amongst the glitterati at fashion shows and premieres; and is even the subject of a movie presently under development at New Line. He’s even been profiled in the New Yorker. This among a growing list of exploits studiously documented in fan magazines like People and Us, and on TV on shows like TRL and Entertainment Tonight.

Avery recently arrived to a Hollywood party and asked a reporter if The Hills’ resident prick Spencer Pratt was there yet, because he wanted to “kick his ass.” All of this behaviour is very-much outside the norm for your cookie-cutter Canadian hockey player. And in many respects it’s preserving interest in his career as a grinder long after the pace of the game in the NHL has moved past players of his ilk. It’s even conceivable that (female) fans in Dallas this season, where he recently signed another one-year contract, might turn up just to see a glamourous NHL star — not Mike Modano, mind you, but Sean Avery.

In any event, if you believe that half of good marketing is just being seen, he engages the popular media with the NHL in a way that is hugely constructive to its image as a major sport with dynamic, cool, exciting players. The revelation here is that what makes a hockey player exciting in this multimedia world is not limited to what he does on the ice. What the die-hards among us will need to accept if we expect the league to grow and flourish is a lot more guys like Sean Avery.

-Ian.

—- http://news.com.com/2100-1033-978126.html Cisco, SBC link arms for outsourcing

By Reuters December 17, 2002, 5:29 AM PT

Cisco Systems and SBC Communications announced on Tuesday a pact potentially worth billions of dollars and designed to encourage companies to outsource services.

Cisco, the maker of equipment that directs Internet traffic, and SBC, the U.S. local telephone company, said their new three-and-a-half-year marketing and sales agreement will enable businesses to cut costs by shifting various communications services to SBC, starting with secure VPNs (virtual private networks).

Under the deal, corporate customers will cut costs and outsource nonstrategic work. SBC will generate revenue by offering the services, while Cisco will ring up sales as the preferred equipment provider to the phone company.

“The notion of becoming a key supplier of infrastructure gear for an incumbent (telecom) player is really a big deal for Cisco because it’s sort of the temple of carrier-class thinking that when you get validated by the likes of SBC…you really have cracked a very tough nut,” said Roland Acra, chief technology officer of Cisco’s service provider business.

The SBC pact is Cisco’s first deal on a phone company’s traditional voice network. Generally, Cisco supplies equipment for data networks.

Other services SBC will eventually offer customers using Cisco equipment include integration of voice, data and video on a single network, advanced security options, wireless local area networks, and managed Web and storage-area network hosting.

San Jose, Calif.-based Cisco has pushed to boost its smaller telecom business by using its strong ties to corporate customers to sign deals with telecom service providers. Telecom accounts for about 20 percent of Cisco’s sales, and Cisco wants to boost that to more than 40 percent over the next five years.

The company derives the bulk of its revenue from large corporations outside the telecom sector. In turn, SBC is trying to take advantage of Cisco’s dominance in the enterprise sector to boost its business.

“Focus on managed services is a fundamental shift and we felt doing things with Cisco made a lot of sense because of their presence in the market for the enterprise perspective,” said Mike Reddout, SBC’s vice president of emerging services.

VPNs allow businesses to securely use the Internet to share files and other data.

For the past couple years, SBC has been one of the largest resellers of Cisco gear. SBC, based in San Antonio, Texas, also recently said it would buy high-end Cisco routers, machines used to connect computer networks for the transmission of data and information, for a nationwide network delivering new online services to businesses.

Financial details of the new agreement were not disclosed. But Carlos Dominguez, Cisco group vice president for the U.S. service provider business, said that the market for such managed services was a multibillion-dollar opportunity. SBC said its has seen annual growth of 25 percent in demand for managed services and expects that to continue.

Dominguez said the deal with SBC is larger in size and scope than similar deals previously signed with British-based Cable & Wireless or with U.S. long-distance telephone carrier Sprint.

In late April, Cisco said that Web hosting company Cable & Wireless would use Cisco equipment under a four-year partnership to offer companies a single, Internet-based communications network that hooks up all their desktops, allowing them to cut costs and operate more efficiently.

Cisco said at the time that the Cable & Wireless deal was worth hundreds of millions of dollars for both companies. Cisco signed its partnership with Sprint in December 2001.

Story Copyright © 2002 Reuters Limited. All rights reserved.

———–

One camp suggests that the wells ran dry because of the dreaded LAST MILE problem, that being that if consumers and businesses can’t get adequately high-speed connections to their homes and offices, then what’s the point of having a super-high-speed backbone?

Another camp, and here’s where you’ll find me, believes that the real problem is applications. After nearly 10 years of what will become known as the “Business Internet” we are still left with one of its first tools, email, as the most compelling driver in getting people to adopt and adapt. Email, of course, is not particularly bandwidth-intensive. So the need, then, would seem to be one of developing super-high-speed, high-bitrate applications to fill this glut of pipes and resurrect the industry.

Some telcos, notably SaskTel, are launching Video Over DSL. Others are dabbling in streaming audio and video, telephony, and other realtime applications over the public internet. But Broadcast and Realtime are not fundamentally what IP was built to do, and so for now there is an uncomfortable tension between aspirations and the functional capabilities of the medium. And there’s also that last mile thing.

People have fooled around with peer-to-peer file sharing, much to the chagrin of the RIAA. That drove many dialup users to broadband. Could peer-to-peer, born again within some kind of legal copyright-friendly (but costly) framework, resurrect demand? I suspect it will need to. But the bits still cost too much money — the whole pricing structure of the internet industry is designed for small bits, not big bits. Pricing for big bits is way too high relative to their cultural value.

How does this relate to Intel? Well, it’s an allegory. And a common problem.

Processor speed has far outpaced demand. Even the hungry Windoze XP doesn’t make a 3GHz Pentium 4 break a sweat (not even at Gersham’s house). It’s also too expensive. But more importantly, the problem is applications. While XP is great, it’s an operating system — it doesn’t actually DO anything. Applications drive us toward a particular operating system, which in turn drives us to buy the hardware that best supports it.

Processing capacity, or cycles, (see Moore’s Law) is now dramatically outpacing processing requirements in the popular applications we all use. They can only add so many processor-hungry, real-time features (like Mr. Paperclip) to Microsoft Word before it gets annoying. Email, in addition to not requiring lots of bandwidth, doesn’t seem to require lots of horsepower either.

So what applications will motivate my mother, who happily chugs along with a Pentium II/166 with 64MB of RAM, surfing the web and reading her email, to jump on the bandwagon and buy a newer faster better PC?

As a good friend said to me last week, 95% of what the internet will be in 5 years doesn’t even exist today. And that is a message of hope, I think — but I’m torn in trying to critique his point. Does it represent unbridled optimism? Or is it a healthy reflection on where we are at today?

In the interim, though, cycles — like bits, are now officially commodities. And, like the three-year speed bump in the network buildout (which we are presently nearly two years into), there’s very little to sustain the guys who sell us cycles.

Now is the time to innovate; break the mold and forge new models. The good news is that in this down market there’s a bonus: thanks to commodification, bits and cycles are cheap. And this confluence of vacuums in both transport and processing capacity is the opportunity to remedy its own cause. All that’s needed is effort, and new thinking.

-Ian.

———- http://story.news.yahoo.com/news?tmpl=story2&cidR8&u=/ap/20021016/ ap_on_hi_te/earns_intel&printer=1 Intel Stock Plunges Wed Oct 16,10:53 AM ET

By MATTHEW FORDAHL, AP Technology Writer

SAN JOSE, Calif. (AP) – Intel Corp. stock plunged Wednesday after the company missed Wall Street’s third-quarter earnings expectations after a lackluster back-to-school season and weak corporate demand for computers.

The world’s largest chip maker also said Tuesday it does not believe the economy has bounced back enough to support much improvement in the fourth quarter from holiday sales.

“There is some demand out there — but not as strong as you would typically see in the second half of the year,” said Andy Bryant, Intel’s chief financial officer.

Intel released its earnings after the stock market’s close on Tuesday. Shares sank 16.8 percent, or $2.77 each, to $13.75 in early trading Wednesday on the Nasdaq stock market.

For the three months ended Sept. 28, Intel earned $686 million, or 10 cents a share, compared with a profit of $106 million, or 2 cents a share, in the same period last year.

Excluding special items, the company earned $768 million, or 11 cents per share, compared with a profit of $655 million, or 10 cents a share, in the third quarter last year.

Intel reported third-quarter revenues of $6.5 billion, roughly flat with sales of $6.55 billion of last year.

Analysts were expecting a third-quarter profit of 13 cents per share on sales of $6.52 billion, according to a survey by Thomson First Call.

In July, the company estimated third-quarter sales would be between $6.3 billion and $6.9 billion. Last month, it said revenue would fall to the lower end of that range.

Intel is not alone. Earlier this month, rival Advanced Micro Devices Inc. warned that its revenues would fall about $100 million short of expectations and it expected to post a “substantial operating loss for the quarter.”

Intel announced in July it was cutting about 4,000 jobs. On Tuesday, Bryant said Intel had not achieved its savings targets.

Typically, Intel and other semiconductor makers see as much as a 20 percent boost in sales during the holiday-buying season. Intel said it expects fourth-quarter revenues to be between $6.5 billion and $6.9 billion — at best, a 6.2 percent jump from the current quarter.

The semiconductor business is now in its second year of dismal results as demand for personal computers have fallen short and up-and-coming uses for chips haven’t quite taken off.

Microprocessors, which make up the brains of computers and the bulk of Intel’s business, have yet to return to the growth rates seen in the late 1990s.

Analysts say consumers and businesses don’t see a need to pay top dollar for the fastest Pentium 4 when slower models can handle typical tasks just as well.

Moreover, the bulk of any gains in Intel’s processor business — typically at the expense of AMD — are in the low-end products. That tends to squeeze average selling prices and margins.

“There are not a lot of people running out there to buy,” said Eric Ross, an analyst at Investec. “When people are buying things, they’re buying cheaper PCs.”

During the third quarter, Intel introduced 18 microprocessors for desktops, notebooks and servers. Intel’s top Pentium 4 now runs at 2.8 gigahertz. A 3.06 GHz machine is expected in the fourth quarter.

The company also said it expects no material impact in the third quarter from a federal judge’s ruling in a patent dispute that could cost Intel as much as $250 million.

Intel said it has asked the Texas judge to reconsider his ruling in favor of Intergraph Corp., which claimed its patents were infringed by Intel’s Itanium server processor.

More information on the impact of the decision will be released with Intel’s November regulatory filing, the company said.

———–

Press Release SOURCE: Infonetics Research

Next Gen Voice Product Market Hit $233.6M In 2Q02; Strong Growth Expected In Asia Pacific

SAN JOSE, CA–(INTERNET WIRE)–Aug 22, 2002 — Worldwide revenue for next gen voice products totaled $233.6 million in 2Q02, an 18% decline from 1Q02, and is projected to reach $1.1 billion in CY02, according to Infonetics Research’s quarterly worldwide market share and forecast service, Next Gen Voice Products.

“Vendors are focusing on the IOCs and MSOs in the US and incumbent service providers in Asia, as they offer near-term opportunity,” said Kevin Mitchell, Infonetics Research analyst and lead author of the report. “Packet telephony is still undoubtedly the future of voice–we’re still headed toward an all-packet world–but the market is maturing at an inopportune time as service providers continue to cut expenditures or close up shop altogether. On the bright side, there’s enormous opportunity in the Asia Pacific region: in 2Q02, revenue for next gen voice hardware and software totaled $40 million in Asia Pacific, and we project it to hit $237 million in CY02, representing 21% of worldwide revenue totals.”

Media servers are now tracked in this report because they are a crucial part of the softswitch architecture and will play a more important role in the future as service providers deploy next gen services on packet networks. The worldwide softswitch market was fairly robust in 2Q02, growing 14%, and showing strength in EMEA and Asia Pacific. Worldwide revenue for media servers totaled $6.7 million in 2Q02, an 83% increase from 1Q02.

Infonetics Research’s Next Gen Voice service includes quarterly updated forecasts for all regions–worldwide, North America, EMEA, Asia Pacific, and ROW–tracking voice over broadband gateways, broadband loop carriers, RAC VoIP gateways, voice/data switches, media servers, softswitches, and voice application servers. Companies tracked in this service include Alcatel, Broadsoft, Cirpack, Cisco, ComMatch, CommWorks, Convedia, Convergent, General Bandwidth, Integral Access, IPUnity, Italtel, LongBoard, Lucent, MetaSwitch, NexVerse, Nortel, Nuera, Occam Networks, Santera, Siemens, Snowshore, Sonus Networks, Sylantro Systems, tdSoft, Tekelec, Telcordia, Telica, Terayon, UTStarcom, VocalData, Zhone, and others.

For the table of contents of this report, which includes methodology notes, please contact Larry Howard, Vice President, at larry [at] infonetics [dot] com or 408.298.7999 x225.

Infonetics Research (www.infonetics.com) is an international market research and consulting firm covering the networking and telecommunications industries in the US/Canada, Europe, and Asia. We provide objective analysis of end-user and service provider buying plans and product manufacturer market share and market size through in-depth research studies and quarterly market share and forecast services.

Ex-Cisco executive in federal custody By John Geralds in Silicon Valley [10-05-2002] Suicide attempt followed alleged $20m fraud

Missing since early April, the ex-Cisco vice president fired for allegedly defrauding the company of as much as $20m, has been found and ordered to undergo a court-imposed psychiatric evaluation.

Robert S Gordon was found unconscious on 30 April after ingesting a combination of drugs and attempting to asphyxiate himself with gas from a stove, according to court records filed this week in San Jose.

The 43 year-old, who appeared in court confined to a wheelchair, had been close to a plea arrangement with prosecutors.

Assistant US Attorney Scott Frewing argued that Gordon was likely to make an escape attempt and should receive a psychiatric evaluation in a federal prison medical facility.

Frewing told the court that Gordon had been withdrawing as much as $1m, which he gave to his girlfriend in March in preparation for his flight from justice.

Defence lawyers insisted, however, that the money transfers were part of an effort to distribute his assets before killing himself.

Gordon’s case will remain open until the psychiatric evaluation is completed, which his lawyers said could take more than a month.

A federal grand jury indicted Gordon last year, alleging that he orchestrated two schemes to defraud Cisco.

One involved the diversion of millions of shares of Cisco-owned stock into an offshore shell company, and the other was designed to channel money to Gordon himself from a Cisco-affiliated startup.

———–

URL: http://zdnet.com.com/2100-1106-848203.html

A huge exodus from San Francisco may be under way as high-tech companies pack their bags for cheaper North American cities and regions, according to a study.

San Francisco is the most expensive North American city for a high-tech company do to business, with an estimated average cost of $43 million a year, according to The Boyd Company, a consulting firm that advises major companies on location planning. For example, a company relocating to Baltimore from San Francisco would see a savings of about 21 percent, according to the study’s figures.

And as if that’s not incentive enough for companies to relocate, an increase in government spending on defense, centered in the metro Washington, D.C., area, and the lure of cheaper operating costs north of the U.S. border, are about to siphon more business out of Northern California.

“I have never seen a decline so rapid,” said John H. Boyd, talking about the conditions that precipitated the study.

The numbers for the study were based on the average cost of operating a 500-employee facility.

Boyd, who has done location planning for 27 years as president of The Boyd Company, said he has watched with amazement as the unemployment rate in San Francisco has risen from 1.7 percent in January 2001 to 7.5 percent in January 2002. That figure doesn’t compare favorably with the national average of 5.6 percent in January, Boyd said.

Things may get worse, he said, as companies head east and north, following the two biggest money trails of the post-Sept. 11 economy.

Venture capitalists “are saying, ‘Show me the money,’ and companies are concluding they have to be competitive on a global scale,” Boyd said. In an economy where it is close to impossible to cut costs, cost reductions have a new importance, and site selection has become more critical.

“Canada is emerging as an alternative location for U.S. high-tech investments in the recessionary economy,” Boyd said, citing a lower exchange rate, the elimination of tariffs under NAFTA (North American Free Trade Agreement) and the absence of corporate health care costs in a country with a national health care system. Several companies have already caught on to the trend: Mountain View, Calif.-based Intuit and Houston-based Compaq have both listed their Calgary, Alberta, facilities as among their most profitable, Boyd said.

“Many companies in the (San Francisco) Bay Area are also looking to Washington because of the vast government spending for the war on terrorism,” Boyd said. John Hopkins University, which has locations throughout the Baltimore-Washington area, “is the center for bio-terrorism research, and the NSA (National Security Agency) is becoming the catalyst for billions and billions of dollars in electronic surveillance and Internet security spending by the federal government,” he added.

“It’s like Silicon Valley is returning to its roots; it was founded in the defense industry in the 60s,” Boyd said.

Of the individual cities being considered, Baltimore; Vancouver, British Columbia; and Calgary are considered some of the most attractive. Baltimore was the cheapest U.S. location included in the study, at $34.4 million a year. Vancouver was the highest-priced Canadian city, at $35 million, and Calgary was the lowest, at $27.7 million.

Santa Clara County, Calif., which includes San Jose, Calif., and most of Silicon Valley, came in second to San Francisco with costs of $41.7 million. New York was next, at $40.9 million and then Boston, at $39 million.

Of course, not every city in North America was considered. The study takes factors such as pre-existing technology centers, ease of travel, and other nuances into consideration. The Boyd Company has spent the last nine months doing everything from number crunching to interviewing mayors to come up with the survey cities, which are likely to become targets for expansion or relocation by the consulting firm’s clients.

Though Boyd would not disclose which companies are considering relocation, he listed Compaq Computer, Chase Manhattan Bank, Pitney Bowes and Time Inc. as clients.

“These cities included in the study were not chosen at random; you will see them on the short lists of corporate-site seekers over the next 12 months,” he said.

Tuesday November 20, 8:15 pm Eastern Time

Press Release SOURCE: Infonetics Research, Inc.

Next Gen Voice Product Market Hits $135 Million in 3Q01

Will Reach $465 Million in 3Q02

SAN JOSE, Calif.–(BUSINESS WIRE)–Nov. 20, 2001–Worldwide revenues for next gen voice products totaled $135 million in 3Q01 — down 6% from last quarter — and are forecasted to hit $465 million in 3Q02, according to Infonetics Research’s quarterly worldwide market share and forecast service, Next Gen Voice Products, released today. Voice/data switches, voice over broadband gateways, VoIP gateways, class 5 packet gateways, and softswitches are tracked and forecasted in this service.

In recent quarters and into the near term, more next gen voice hardware than softswitches are being sold as initial service provider build-outs focus on footprint and tactical cost savings measures such as packet tandem and Internet offload. Softswitches and application servers will make up a larger portion of next gen voice product revenues during later phases of deployment.

“3Q01 was a mixed quarter for this market,” said Infonetics Research analyst Kevin Mitchell. “Hardware revenues declined 15%, but softswitches are up 8% from the previous quarter. Overall, we are bullish on this market for the long term.”

“The softswitch market is still in developmental mode and revenues have been flat the past 3 quarters. This market is experiencing a slow start due to the complexity of the softswitch architecture. We expect it to heat up in the second half of 2002 as service providers look to either augment their existing voice services or start from scratch with service delivery softswitches.”

Companies tracked in this service include Alcatel, Cirpack, Clarent, comMatch, CommWorks, Convergent Networks, CopperCom, General Bandwidth, Integral Access, ipVerse, Jetstream Communications, Lucent, Mockingbird Networks, Nortel, Nuera, Santera, Sonus Networks, Syndeo, tdSoft, Telica, Terayon, Telcordia, TollBridge, Unisphere, VocalTec, Zhone, and others.

Next Gen Voice Products helps companies understand the size of the market, the speed at which it’s growing, how it will grow in the future, and who’s leading in the various segments of the market. The quarterly service, delivered electronically, provides worldwide market share and shipment data, and forecast data divided by North America, EMEA, Asia Pacific, and the rest of the world.

For the table of contents of this report, which includes methodology notes, please contact:

* Larry Howard, Vice President, Western North America larry [at] infonetics [dot] com, 408/298-7999 x225 * Paul Ruggeri, Director of Sales, Eastern North America paul [at] infonetics [dot] com, 401/826-2160 * Gautam Sabharwal, Account Manager, Europe and ROW gautam [at] infonetics [dot] com, +44 (0) 19-2343-8276

-Ian.

——— http://dailynews.yahoo.com/h/ap/20010928/tc/exciteathome_bankruptcy_4.html

Friday September 28 8:32 PM ET

ExciteAtHome to Sell Assets to AT&T

By MATTHEW FORDAHL, AP Technology Writer

SAN JOSE, Calif. (AP) – ExciteAtHome, the leading provider of high-speed Internet access over cable television lines, said Friday it will sell its broadband business to AT&T Corp. for $307 million in cash and filed for bankruptcy protection.

Under the agreement, the once high-flying company’s network would become a part of AT&T, which already has a controlling interest in ExciteAtHome. The deal is subject to a bankruptcy judge’s approval.

The bankruptcy papers, filed late Friday in San Francisco, will not result in any service disruptions to ExciteAtHome’s 3.7 million subscribers, the companies said.

“This filing is a tool to protect the value of the broadband business for the benefit of the company’s financial stakeholders and will help reassure our customers that service will continue uninterrupted through the restructuring process,” said Patti Hart, ExciteAtHome’s chief executive.

The directors of both AT&T and ExciteAtHome approved the asset-purchase agreement. The deal, however, could be canceled if higher and better offers are received.

In a statement, AT&T said it plans to build on the assets it acquires to develop a more robust network. AT&T spokeswoman Eileen Connolly declined to comment on how the deal might relate to any possible sale of its broadband unit. In July, AT&T’s board rejected cable TV provider Comcast Corp.’s unsolicited $40 billion stock swap offer for AT&T Broadband. On Friday, Comcast announced it had signed a confidentiality agreement rekindling talks.

ExciteAtHome’s bankruptcy filing is the latest development in the spectacular rise and fall of Redwood City, Calif.-based company.

At the height of the Internet boom in 1999, At Home Corp. merged with the portal Excite Inc. in a $6.7 billion merger. Executives at the time believed the company would someday rival America Online.

But the bubble burst and advertising revenue dwindled.

After losing $7.4 billion in fiscal 2000, ExciteAtHome said in April it needed to raise $75 million to $80 million to make it through 2001. The company restructured its fiber-optic network lease deal with AT&T and sold $100 million in notes.

Even so, ExciteAtHome said in July it needed more cash to stay in business in 2002.

The company also cut back its work force. The latest round came Tuesday, when it reduced its ranks by 27 percent, or 500 jobs as it shuttered its MatchLogic division and discontinued less popular services on the Excite portal.

Shares of ExciteAtHome closed up 2 cents, to 15 cents, in Friday trading on the Nasdaq Stock Market. It lost 3 cents in after-hours trading. It traded around $100 in April 1999. Shares of AT&T closed up 60 cents to $19.30 in Friday trading on the New York Stock Exchange (news – web sites).

AT&T became the controlling shareholder of ExciteAtHome with its purchase of the cable giant Tele-Communications Inc. in 1999. TCI, along with Comcast and Cox, was an early participant in the At Home network.

It’s not the first time that AT&T has purchased the assets of a high-speed Internet provider during bankruptcy proceedings. Earlier this year, it paid $135 million for the assets but not the customers of NorthPoint Communications, which provided high-speed access over telephone lines.