Telecommunications: A Roll of the Dice - Industry Trend or Event

Every year the editors at Telecommunications[R] magazine anticipate yet dread the time in early April when we take the list of start-up companies we have met throughout the year and start whittling down. It's a long and sometimes mind-bending process: What sets apart two companies working on virtually the same type of technology? And how do you compare apples and oranges (a network management system and an optical switch, for example)? You can't, so our strategy has always been to pick the best of the bunch regardless of technology. Virtually every company looks shiny on the surface, and with millions in VC funding so would you. But when you scratch down, characteristics emerge that help make our very difficult decisions a bit easier.

Over the last three years we have chosen more than 40 nascent companies as our hot start-up picks out of the hundreds that have entered the market. It's no coincidence that our cover this month depicts a roulette wheel: One thing these companies need--especially in this interesting economic climate--is a little bit of luck. As batting averages go, were leading the league in terms of the success of past winners. Hindsight is 20/20, but looking back, there are not too many changes we would make.

Consider a few of our previous winners: Despite their tanking stock prices, would anyone really remove Corvis and Sycamore from a hot start-up list? Let's see: Strong products? Killer management? Great marketing? Paying customers? Check, check, check and check. Other strong success stories include Narus, whose Intelligent Business Infrastructure concept captured the attention of a number of customers; Turnstone, which has done the same with its Copper CrossConnect line; and Broadband Access Systems, which has proven to be a great addition to ADC.

But we're not too high and mighty not to admit our mistakes. Pluris, a 1999 hot start-up, has not yet delivered on its high-speed router. Monterey Networks, acquired in August 1999 by Cisco at the same time it bought Cerent (another of our hot start-ups), saw its product discontinued in April. The same happened to the products from Salix Technologies, which was acquired in February 2000 by Tellabs. Failures? Definitely not--each were multimillion dollar acquisitions, but the products turned out to be the wrong place/wrong time/wrong strategy for the acquiring companies.

Our Hot Start-Ups for 2001 have the management, marketing, financial backing and technology that raises them above the noise. Now we can only wish them all the luck in the world.

Editor in Chief