Boom time

Supercomm 2000 proves that competition and a favorable financial environment have made the telecom equipment market a fulfilling place to play

In the unlikely event that the economic boom characterizing the high-tech industry doesn't extend beyond this year, Supercomm 2000 might go down in history as being the one time this show was all about the money.

A shove through the crowds on the show floor, the incessant din and a little historical perspective was enough evidence that this year's show was different from past events. Supercomm 2000 broke all the records: 60,000 attendees and 756 exhibitors, nearly 200 of which were Supercomm first-timers, on a total of 467,700 square feet of exhibit space. What's more, reports were that hundreds of wanna-be exhibitors were turned away for lack of show-floor space - an almost unfathomable fact if you spent any time inside the belly of the massive Georgia World Congress Center in Atlanta.

Clearly, the companies whose exhibits lined the many halls at this year's event are benefiting from a strong economy and a fluctuating - but still favorable - stock market for telecom companies. And the attendees that Supercomm planners are always hoping will show - the service provider representatives who kick the technology tires and make decisions about what goes into their networks - were there in force this year.

Allegiance Telecom's straight-talking CEO Royce Holland summed up the expansionist and competitive attitudes of the industry on the first day of the show: "With the Telecom Act of 1996, Moore's Law has gone on Viagra."

The gloves are off

Past Supercomm events certainly have given competitive carriers equal voice, but some of the statements made at this year's show seemed more adversarial than in the past - perhaps due to the fact that competition is at its current height.

"Compared to us, the ILECs look like Fat Albert in a footrace," said Roscoe Young, president and chief operating officer of competitive carrier KMC Telecom.

All kinds of technology developers were trying to take advantage of that combative undercurrent, which to them translates into more potential equipment sales. As the subsequent pages of this Special Report indicate, the show floor exhibits featured everything from optical networking solutions to wireless network equipment to test gear and beyond.

If there was an identifiable main theme, it was that revenue-generating applications and services have become just as crucial, if not more so, as the underlying technologies that allow them to be transported and delivered.

"Raw bandwidth services are going to become a commodity," said Robert Lucky, corporate vice president of Telcordia Technologies. "You have to move up to higher levels of service to maintain margins. Three years from now there will be some Napster-like thing we never even thought of."

Many established equipment developers used this year's show to try to reposition themselves to take advantage of market opportunities and make themselves known to service providers.

"The marketing challenge is to get every single person in North America to know us," said Pearse Flynn, president of the carrier networking group at Alcatel, which used the show's forum to signal its intentions to displace other suppliers and become a leader in this region. "To play in the North American market, you have to make sure your name is known by everyone."

That sentiment was echoed by other technology developers that have traditionally been outsiders in North America and similarly pledged to make their presence better known.

"I'm always amazed when people say, `I didn't know you guys had that,'" said Eve Aretakis, president of the carrier division of Siemens Information and Communications Networks. "We have things we can deliver, and there are a tremendous amount of vendors with very little to sell. We have to paint the business case for the carrier and tell them why they'd be missing an opportunity."

Other exhibitors used Supercomm as part of their ongoing mission to redefine themselves and re-educate the service provider community on what they're trying to provide.

"We don't position ourselves as just a test company," said Tom White, senior vice president and general manager of the communications solutions group of Agilent Technologies. "Our mission is to help our customers accelerate next generation carriers any way we can."

Cash to burn

Start-up exhibitors also were in abundance, and it's no secret where they're getting the money to exhibit: Venture capitalists are buying into communications firms - especially infrastructure plays - faster than ever.

The VC community invested $5.1 billion in communications firms in the first quarter of 2000, according to the PriceWaterhouseCoopers MoneyTree Survey - almost half the total amount invested for all of 1999. In addition, the proliferation of second- and third-tier VC firms and corporate venture groups means vendors and service providers have a greater choice of financial partners.

"They say the wind is so strong that even the cows can fly," said Walter Alessandrini, CEO of Avanex, a 3-year-old manufacturer of photonic processors that has a market capitalization of $5.5 billion.

Hiccups in the stock market have done little to slow the pace with which these companies are burning cash. "You have to stick to your financial plan and gain time-to-market advantage," said Dennis Rainville, CEO of Equipe Communications. "We push the envelope on spending."

Of course, the noise at Supercomm also makes it harder for companies to gain attention, the same situation they face every day trying to get on a customer's short list. "A start-up's value proposition has to be 10x - not just incrementally better," said Anthony Lavia, CEO of Zaffire, a dense wave division multiplexing system manufacturer for metro and regional area networks.

Wary of being passed by, large players are feeding the start-up frenzy with dollars, hoping to gain access to emerging technologies and stay on the cusp of innovation. Flush with gains from investments in business partners, ADC Telecommunications announced a formal $100 million venture fund. "Right now money is a commodity," said Robert Switz, senior vice president and chief financial officer of ADC. "[Venture investing] is an equalizer - you have to do it. You have to be out there."

Behind the booth jingles, acrobatics, skits and sounds of Supercomm 2000's exhibits were - for the most part - real solutions that spanned multiple technology sectors. Only the economic and competitive climates of the coming months will judge whether this year's event marked a temporary peak or a more permanent high in the industry's state of well-being.