Alcatel snaps up packet engines

Gigabit Ethernet start-up Packet Engines is switching onto a new track after agreeing to a purchase offer from telecomms and cable equipment provider Alcatel Alsthom SA.

The deal, estimated at $US315 million, will give Paris-based Alcatel wire-speed routing and gigabit Ethernet technology.

There are three reasons Alcatel was attracted to Packet Engines, according to Hugh Scandrett, Alcatel's vice president of strategic planning. The first is the company wanted to begin selling some home-grown LAN technology. The second is the quality of the team at Packet Engines, which includes fast Ethernet founder Bernard Daines, and the third is that Alcatel can use Packet Engines boxes as a network access product in IP networks.

"To be able to bring into the Alcatel family a couple of hundred people who are focused on IP technology . . . particularly in ASIC technology, is a lot easier than doing it ourselves," Scandrett said.

The Packet Engines purchase should also help Alcatel expand its North American presence, Scandrett noted. Currently only about 20 per cent of Alcatel's revenue is based on US sales.

The deal comes on the heels of Alcatel's purchase of US-based DSC Communications for $US4.4 billion. DSC has expertise in fixed access systems and mobile switching products.

Packet Engines won't be Alcatel's last acquisition.

"It was publicly stated . . . that Alcatel was in the market and is still in the market for a small number of well-focused technology companies to augment both competency and products in the US," Scandrett said. He added Alcatel is looking at companies in the $US200 million to $500 million range.

Packet Engines is expected to remain a stand-alone entity as a wholly owned subsidiary of Alcatel.

The deal gives Packet Engines the benefit of a big-name backer when it goes out into the market to sell its equipment, said founder and CEO Daines.

"One of the things a small company like us faces is the need to grow very quickly . . . and the need to have a strong partnership and backing to do business with large corporations that sometimes don't want to do strategic things with small companies," Daines said.

In fact, having Alcatel's name behind Packet Engines may already have paid dividends, according to Daines.

"There was a large university we were working with and it was kind of sitting on the fence," he explained. "And the sales people working on that vertical came in and said they were on the fence a bit, but as soon as they mentioned we had the backing of Alcatel, [the university] said bring your equipment in."

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