Sunday, August 1, 1999
A few months ago, the word on the street was that Nexabit Networks was not for sale. At least that was what Nexabit, designer and manufacturer of the world’s fastest switch/router, was proclaiming, and that’s what was widely reported. When it sold for a substantial sum a few weeks ago, to none other than Lucent Technologies, you could almost say to yourself, "I should’ve seen that coming."
"Rumors are always floating," says Mukesh Chatter, Nexabit founder and CEO. "It’s been our job to deny them." Nexabit’s not denying anything anymore – an offer was made and the price was right. On June 25, Lucent announced its acquisition of the privately held startup, for 14 million shares of Lucent common stock. This transaction is worth about $900 million, based on Lucent’s closing stock price that day.
The World’s Fastest Router
Massachusetts-based Nexabit Networks is a 120-person outfit that does one thing, and does it well: creating high-speed multi-terabit switch/router equipment for Internet and carrier-class services. Based on patented technology developed solely by founder Chatter, the company is a pioneer in an emerging category of "super-switches," ultra high-speed routers.
Routers make it possible for raw voice, video or data bits to travel through networks to their destinations quickly and effectively. The Nexabit terabit router is capable of forwarding 6.4 trillion bits, or terabits, per second. That’s 160 times faster than anything else on the market today. With the highest switching speed of any router in the world, Nexabit’s technology could help put Lucent right where it wants to be — at the core of the network. "Lucent was already at the top of ATM switching and the optical business," says Chatter. "IP routing was the third leg that they needed, and we fill that gap."
Nexabit started to realize the advantages of an OEM relationship with Lucent when talks began in early 1999. Although at the outset, these talks were not about acquisition, they soon began to realize what a perfect interoperability relationship the two companies could have. As Internet speed gets faster and faster, the demand for bandwidth is catching up, and although carrier companies like Lucent and Cisco can deliver on the bandwidth, they’ve got to be able to make that bandwidth usable.
Data Handlers
Making bandwidth usable is where routers come in. The core of the network is like a tripod, the legs of which are fiber, Dense Wavelength Division Multiplexing (DWDM) and routers. According to Nexabit, there are 100 times more fibers underground today than there were in 1995, which makes DWDM carrier capacity more than 100 times what it was in 1995. Fiber and DWDM make the data flow, but this is just the plumbing. To convert this raw bandwidth into usable bandwidth, routers are necessary. In this way, routers have become the bottleneck – until now, they have only increased in performance tenfold since 1995. Nexabit’s high-speed routers will allow data to be converted into usable bandwidth 100 times faster than ever before. With three patents and 12 more pending, Nexabit founders maintain that the technology is based on simple architectural innovation, and is no more expensive to produce than any conventional router.
"This will give Lucent not only a leading product for ultra high-speed IP core networks, but also a terrific lead in delivering terabit-speed switch/routers that connect directly to optical networking systems," said Curt Sanford, president of InterNetworking Systems, Lucent Technologies. "We have the leading software capabilities to integrate networks together, plus the unmatched capability to service and support it all." "When we founded Nexabit," says Chatter, "our goal was to deliver the products to unlock the raw bandwidth created by today’s optical networking technologies. Now, working with Lucent and Bell Labs, we have the opportunity to help revolutionize service provider networking capabilities globally."
From the Basement to the Bigtime
One early morning in late summer, 1996, Chatter and colleague Alexander Dingee, Nexabit treasurer and director, met with Ray Stata, founder and chairman of Analog Devices as well as a board member of the Boston Symphony Orchestra, in the BSO basement. Within 45 minutes, Stata was on board and the three became a team.
"My first impression was that Mukesh’s innovative architecture represented a tremendous breakthrough in switching technology," says Stata. "It was obvious to me even as a novice that this invention had huge economic value. The Nexabit router is way ahead of anything coming down the pike."
In January 1997, Nexabit Networks opened its doors with funding from Stata, which continued for 15 months until further funding could be secured. Stata, who currently serves as Nexabit’s chairman of the board, actively advised the company, provided networking opportunities and partnership possibilities, and introduced the company’s founders to vendors and key people. "He is a real hero to me," says Chatter.
Says Stata, "While none of us could have predicted the record-breaking acquisition by Lucent, I sensed that Mukesh had what it takes to create an exciting business. Nexabit did an outstanding job in pulling together a team of A-players that has proven to be up to this task, and that’s certainly a tremendous asset to the company."
In the past year, although they were ready to focus on building the company, Chatter and his team saw that what they really needed was bigger, better infrastructure. Given the hot technology in their hands, they wanted to be able to gain market share by riding along with someone who already had a big presence in the market. When Lucent presented them with an offer, they recognized the advantages of working with a giant who already had marketing infrastructure, customer relationships and compatible leading technology. To boot, the asking price was right. "The timing is right," says Chatter. "The market is ready for this next-generation technology. People need routers like this, desperately. That’s why the deal was so big!"
In two short years, Nexabit has come a long way. When Chatter developed the original Nexabit technology in 1995, he and his wife, Priti, debated for months about whether they should start a company, knowing what hard work and long hours lay ahead. Priti, a full partner in the company, and the couple’s two children, ages 4 and 7, have not seen Chatter take a day off in nearly three years. This July 4, he took a few days off before leaping into his new role as Advanced IP Core Technologies Vice President for Lucent’s InterNetworking Systems Group (INS). The Massachusetts-based facility will continue to operate under the Lucent umbrella.
What’s Next, Nexabit?
Right now, Nexabit routers are being tested with 14 customers. Nexabit won’t reveal who they are, but they are saying that within a few months, trials should conclude and the product will be ready to ship. Future plans are currently being discussed. "We are now just sorting out the details with Lucent, but basically, Lucent wants to be at the core of the network," says Chatter. "We can help with that — we are a company that thinks outside the box."
So what about the competition? "Cisco is always the competition," says Chatter. "If they don’t have the technology already, they will. Now that datacom and telecom are merging, it’s all becoming a common network, and everyone wants to own that core technology, for obvious reasons. The converged, or universal network, is the future. Routers will allow those networks to happen, so the competition will inevitably produce what it needs."
