The young network equipment makers, also represented by companies including Extreme Networks, Juniper Networks and Copper Mountain Networks, burst onto the networking scene with red-hot initial public offerings in 1999, finding instant success against networking behemoths like Cisco Systems and Nortel Networks. They are often referred to as the "Class of 1999".
The companies, armed with cutting-edge technology, saw their revenue and stock price soar as they fed telecommunications service providers' big appetite for high-speed gear that accelerated private business networks and the public Internet. The boom was perhaps best represented by the 525 percent first-day jump in Foundry's stock--a once unheard-of one-day performance for a new offering.
But now these networking companies are faced with the biggest tests of their young lives as a growing list of customers--particularly emerging service providers--go out of business and the US economic slowdown begins to seep into the international markets. Though Juniper has been unscathed thus far, Foundry, Extreme and Sycamore have all issued profit warnings in the past week, joining Redback and Copper Mountain, which previously issued warnings. Some analysts say the recent financial troubles will fuel more talk of potential mergers between the young companies, much like the recent rumor that Juniper was in talks to acquire Redback.
"It will be a challenging time for the next year to a year and a half, and consolidation is always a possibility," said Gartner analyst Tim Smith. "Any one of them could be a likely acquisition candidate if some of the larger companies want to solidify their positions with various products."
The news could also be dire for those that followed the golden road blazed by companies such as Juniper and Sycamore in 2000. Start-ups Corvis, Avici Systems and CoSine Communications, have seen their prospects plummet amid an imploding market that has spared no equipment maker.
