RBC Report: Cisco Winning More Router Deals Against Juniper, Others

In a report issued to investors earlier today, RBC Capital Markets analyst Mark Sue wrote that Cisco likely will reach or surpass projected revenue estimates when it announces results of its fourth-quarter financial performance on August 8th.

Cisco’s provided prior guidance indicating revenue would range from $7.8 billion to $7.95 billion, with earnings of approximately 28 cents per share.

Sue says Cisco is benefiting from higher router sales and favorable market trends in North America, especially in enterprise accounts, where market drivers include switch upgrades and burgeoning adoption of VoIP systems. On the telecommunications side of the business, Cisco’s CRS-1 routers are said to be helping Cisco capture new accounts over Juniper Networks and other competitors, with notable wins in China and Japan.

With the CRS-1, Cisco has integrated greater features and functionality into its routers than has Juniper. That approach has proven popular with many carriers. Perhaps in a bid to counter Cisco’s success, Juniper recently decided to follow Cisco’s lead of integrating session border controller (SBC) functionality into its routers rather than selling SBCs as separate networking products.

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American Idol-Style Rush to Judgment on Netscape.com Makeover

An argument could be made that today was a tad slow for technology-industry news, but surely the venerable New York Times could have covered something more worthy than the tempest in a teapot over Netscape.com’s stylistic overhaul from old-style Internet portal to Digg-style interactive-news site.

In its story today, the New York Times reports that many of Netscape.com’s stalwart patrons were not pleased with the makeover. According to the Times’ coverage, 300 fans of the site’s former look and feel reacted angrily to its transformation into a “social news” venue, expressing their displeasure in comments posted directly on the Netscape site. An online petition, requesting that AOL bring back the old Netscape.com, soon followed; it has received about 1,300 signatures.

In response to the story, Jason Calacanis, the CEO of AOL’s Weblogs.com and the man who oversaw the changes to Netscape.com, pointed out a minor inaccuracy in the Times’ report — namely, that Netscape.com allegedly attempted to silence dissenters by refusing to allow them to cast “votes,” analogous to “Diggs,” on commentaries and news stories critical of changes to the site. He also wrote, quite reasonably, that it wasn’t surprising for some former patrons of the site to dislike the overhaul. Some people don’t like change; some do. That said, it’s obvious that the quality of any change, as well as subjective personal taste, is a critical factor.

What’s relevant, from a news perspective, is whether the changes at Netscape.com ultimately will drive more traffic to the site. It was a backwater in its previous form, and it needed to be reinvented if its minders had aspirations of it being anything more than a me-too portal. So, in a bid to gauge whether traffic volume to Netscape.com has changed since the revamp, Katie Fehrenbacher at GigaOm checked with Hitwise and found that the Netscape site has experienced a 17-percent traffic increase from the week ending June 24 to the week ending July 15th. There was a lot of press coverage — affirmative, negative, and otherwise — about Netscape.com during that period, so she cautions not to read too much into those numbers.

Actually, it’s too early to draw a meaningful conclusion about the effectiveness of the site’s redesign. The TechEffect blog at Deal.com stresses that the imbalance between the relatively high number of votes on stories posted at Digg.com and the relatively low number of votes on stories at Netscape.com suggests that the latter’s cosmetic surgery has failed to make it sufficiently attractive. I don’t agree — not yet, anyway. It took Digg a bit of time to build its appeal, and it will take Netscape.com time to find a new audience. Will that audience prove large enough to make it a legitimate competitor to Digg? I don’t know, and I don’t think anybody else can answer that question definitively at this point.

Rather than rushing to judgment, voting down Netscape’s site as though it were a caterwauling contestant on American Idol, let’s see how it evolves. I’ll wager that AOL is giving Calacanis more than a few weeks to sort out whether the initiative will find favor with a sizable audience.

VC Funds Surge in Q2; Where Will Money Go?

Venture capitalists secured $11.2 billion for future investments during the second quarter, marking the industry’s biggest spike in fundraising in more than five years, according to data released Monday by Thomson Financial and the National Venture Capital Association.

The surge of new funds represented the largest wave of money to flood into venture-capital coffers in any three-month period since the first quarter of 2001, when VC firms raised $16.6 billion. Venture capitalists have raised $18 billion so far this year, a 41-percent increase from $12.8 billion raised during the corresponding period last year.

Interestingly, Oak Investment Partners raised $2.56 billion and New Enterprise Associates accounted for another $2.25 billion, representing nearly half the total. The remaining $6.4 billion accrued to 48 other funds.

Oak Investment Partners is a multi-stage VC firm with about $8.4 billion in committed capital, with an investment focus on communications, information technology, internet new media, financial-services-related information technology, healthcare services, and consumer retail. NEA focuses on the information-technology and healthcare industries, funding high-growth ventures from seed stage to IPO — though he latter is occurring less frequently and takes considerably more time than was the case during the boom that preceded the 2001 bust. A percentage of NEA’s latest venture fund, raised during the second quarter, is earmarked for expansion in the fast-growing technology sectors of China and India.

We know IPOs are occurring at merely a fraction of the pace they once did, and, with Sarbanes-Oxley and other forms regulatory compliance acting as inhibitors, it’s unlikely the halcyon days of prolific IPOs will be returning in the foreseeable future. So, what will the VC firms do with this boom-like tidal wave of cash? Do they have a coherent plan, or will they just hope to run up management fees while doing as little as practically possible?

Paradoxically, one theory suggests that the paucity of IPO exits is forcing VCs to pump more cash into their investment vehicles over longer durations of time. According to this theory, VCs are recognizing that it will take longer for exits to materialize, and they understand that they’ll have to put more rounds of money into their companies to get them to a point where an exit, either an IPO or an acquisition, becomes a reality.

Still, how long do VCs expect these companies to mature as investment vehicles? Are they looking at ten- or fifteen-year horizons? Are they really willing to wait that long?

It’s difficult to conceive of another bubble taking shape today, with the major vendors across the information-technology universe applying greater due diligence to prospective acquisitions while attempting to enforce heretofore unprecedented degrees of financial and operational rigor. It’s also difficult to understand how, even with longer time horizons requiring ongoing investments in existing vehicles, Oak Investment Partners and NEA can responsibly allocate the prodigious investment funds they’ve raised without making a few ill-advised bets in the process.

Despite Montecito’s Belated Launch, Itanium Line Appears Doomed

Those of us who are old and have long memories — quite a trick, by the way — will recall when Intel and HP first got together to build what was billed as a CISC-RISC hybrid microprocessor that ultimately became the Itanium.

Hewlett-Packard has abandoned ship, though it still sells servers that incorporate the Itanium, and one has to wonder how much longer a cost-cutting Intel will stay the course.

Tomorrow Intel will launch the Itanium2, previously codenamed Montecito. The Itanium successor is a dual-core, faster successor to its forerunner, sporting far more memory and greater energy efficiency.

Even so, it won’t blow the doors off its high-performance server-computing rivals, the RISC-based SPARC and POWER microprocessors from Sun and IBM, respectively. Itanium2 gets Intel back into the game for high-performance computing design wins, but those do not amount to a revenue-rich target market. Most of the customers who eventually buy and use servers based on the new chips will be in relatively esoteric, simulation-intensive applications, such as meteorological research, aerospace design and simulation, or nuclear-related energy and weapons research.

Hewlett-Packard is the only major systems vendor with a commitment to buy Itanium2 in anything approaching volume shipments. Smaller, more specialized server vendors will license the chip, including Unisys, which integrates and sells servers and related infrastructure to government customers.

Even though some analysts contend that Intel derives brand equity from having a microprocessor architecture that is employed in the rarefied altitudes of high-performance computing, Intel has entered a new era of cost containment in which “soft” brand benefits will not matter as much as cold, hard ROI calculations.

As Intel pares staff and cuts costs, it’s difficult to conceive how the Itanium line will see another commercial iteration beyond the one being announced tomorrow.

Building a Biometric-Security Powerhouse, Piece by Piece

It wasn’t top-of-the-fold news, at least not on the surface, but Viisage Technology Inc., which makes identification systems using facial-recognition technologies, announced an acquisition of privately held Iridian Technologies Inc., a developer of iris-recognition technology, for $35 million in cash today.

Viisage pursued Iridian primarily for its intellectual property, which apparently includes the development of software that can capture iris images from tens of feet away, even if the target is not standing still.

This acquisition news becomes extremely significant when you understand that Viisage Technology Inc.’s chairman of the board is Robert V. LaPenta, founder and CEO of L-1 Investment Partners, LLC, and a former executive at Loral Communications and a subsequent founder and driving force behind the success of defense contractor  L-3 Communications. LaPenta is well connected to the defense establishment and the Pentagon, and his past corporate performance includes more than 60 acquisitions compiled during 30 years of executive-management experience.

Viisage’s acquisition of Iridian will be financed through $100-million in investment funds that  L-1 forked over at the end of last year.  In January of this year, L-1 played matchmaker in Viisage’s acquisition of fingerprint-biometrics company Identix for approximately $770 million. Just a month later, Viisage acquired SecuriMetrics Inc., a company specializing in iris-scanning technology, for $28 million in cash.

When this deal is complete, and with all the puzzle pieces seemingly sliding into place, LaPenta will step from behind the curtain to take center stage. He proposes to rename Viisage, calling it L-1 Identity Solutions to better reflect the company’s extensive line of biometrics products and solutions. The resulting company has all the biometric-security elements: fingerprint authentication, facial-recognition verification, and iris-scanning technology.

L-1 Identity Solutions will make a sales pitch that each biometric-security technology has value, but that all of them together are imperative for the most sensitive types of intelligence or defense applications. If you look at LaPenta’s track record and his business contacts, it’s hard not to think that his pitch won’t find more than a few buyers.