Jost Spielvogel

A year ago, the telecom world was abuzz with speculation of a German invasion of the U.S. market led by Deutsche Telekom. While the telco giant's acquisition of VoiceStream Wireless apparently will be realized, the greatest German influence on North American telecom market may come from a vendor.

Long a European powerhouse, Siemens has launched a multipronged strategy to establish a foothold in the U.S. Market conditions have prevented its Unisphere Networks spinoff from going public, but the IP-solutions company has landed numerous customers. After recently claiming a top-three spot among handset manufacturers worldwide, Siemens plans to have a similar impact in the U.S.

But making inroads in the U.S. may be most critical in the optical transport arena, which is why Siemens created Optisphere Networks, a wholly owned subsidiary based in Reston, Va.

“Currently, the U.S. represents 75% of the world's optical market,” says Optisphere CEO Jost Spielvogel. “That number will go down over time, but we don't see it being less than 60% in the future.”

Spielvogel has been leading Optisphere for only three months but is a long-time Siemens executive who is thoroughly ingrained in the parent company's corporate culture.

“You have a choice whether you want to call it a fresh assignment or an old-age assignment — it's true from both sides,” Spielvogel jokes. “Right now, I'm feeling old. There are so many things to be done. This market is a huge opportunity. From that point of view, it keeps you extremely busy.”

Indeed, unlike most start-ups, Optisphere had a customer base upon being founded 14 months ago. While Spielvogel certainly appreciates the revenues, the scenario creates complications.

“You are faced with at least two challenges,” he says. “One, to maintain the business you have and, on the other hand, to take a fresh start like a start-up company and be innovative.”

But Spielvogel is not complaining. He says it is “comforting” to have the support of Siemens, which has the resources to let Optisphere pursue long-term goals and not treat the company as a short-term investment.

Such a philosophy is much different than the environment that has spawned many start-up failures. While disappointing to many, he believes the economic shakeout was inevitable — and necessary — as too many in the telecom industry were influenced by marketing hype rather than business fundamentals.

“One carrier told me he would not dare to procure a system below 100 channels because then he would be branded as not being aggressive enough and not seeing the growth everybody else expects,” Spielvogel says.

“So he went for 100 channels. Now he says he doesn't need more than four channels,” Spielvogel says. “These kinds of things come to some point. That's what we're seeing.”

If it can overcome its marketing weaknesses, Optisphere has the product portfolio to make an impact in the ultra-competitive U.S. optical market, according to Ken Kelly, senior research analyst for Stratecast Partners.

“By positioning Optisphere here in the States and staffing it with the right people, they can succeed,” he says. “The only problem is they're going to be going up against some 800-pound gorillas, like Nortel, Ciena and Lucent.”

Because wresting business from such established vendors will be so difficult in the core of the network, Kelly believes Optisphere should focus its efforts elsewhere.

“I think [the edge] is where they need to look,” Kelly says. “The long-haul market is pretty well taken up. But in the metro areas they've got a chance. They can do it if they staff properly, and if Siemens funds them properly.”

Spielvogel agrees, saying that Optisphere believes its best U.S. opportunities will coincide with carriers upgrading their metro networks to carry 40 Gb/s. In March, Optisphere attracted industry attention by announcing that its solution carried 3.2 Tb/s of traffic over an installed loop in WorldCom's network.

“We feel we will achieve a major piece of that segment,” Spielvogel says. “It's a very complex technology on one hand, so there aren't many companies that have demonstrated they can cope with it. We feel we are rather advanced in our development, so, from this point of view, we should be in a rather good position.

“I'm not going to tell you we're going to be a second Nortel success in 10-gig, but certainly that's some kind of example you want to study carefully and copy as much as possible.”