On The Networking Money Trail

By Sean Michael Kerner

May 04, 2006

Venture capitalists and analysts weigh in on where the $28 billion dollar networking sector is going.

LAS VEGAS -- Where is networking headed and where are enterprise buyers spending their dollars? Venture capitalists offered some input during the Interop networking conference here.

Inder Singh, senior vice president of Prudential Equity Group, said carriers are rolling out so-called quad plays: video, voice, data and mobility services. Video is a big ticket item.

"Video will be a big party of spending by carriers," Singh said. "It's a defensive move against cable. Every pipe ultimately becomes commoditized and the only people that can make money are those that make content."

What investors really want is not so such the coolest technology but top line growth, Singh said. "Look for markets that are growing and which companies are taking share in those markets."

Carl Amdahl, technology partner at Doll Capital Management, said he is currently investing in advanced wireless communications and silicon for video applications "I see advance bandwidth both through fixed and wireless and being attractive as a huge growth area over the next five years."

From an analyst's point of view, the outlook looks somewhat different.

Abner Germanow, director of enterprise networking at IDC, said port growth with 10 Gigabit Ethernet , which supports data transfer rates of 10 Gigabits per second, is likely to be the real story of 2006 and into 2007.

According to the latest IDC data, wireless LAN  growth in 2005 was actually fairly flat.

"When Cisco bought Airespace [a maker of WLAN controllers in 2005], it stalled the market for three quarters," Germanow said.

He said enterprise spending on wireless has also shifted from access points to access point controllers.

According to an unpublished May, 2006, IDC survey that Germanow cited, enterprises ranked security functions and appliances as their top networking upgrade initiative for 2006. Wireless LANs came in second and in third were those who said that they don't have a major networking initiative planned in 2006.

Cracking IDC's top ten spending items for the first time was IP voice technologies, which Germanow called a driving spend on the network.

In response to a question from the seminar audience about the role of open source networking equipment, Germanow said he does not see a place for it in core networking.

"For things like PBX , [open source IP-PBX maker] Asterisk has been very interesting," Germanow said. "Snort [an open source intrusion detection system], has been very successful too."

But he called Vyatta, which offers an open source router, "interesting but very very fringe."



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