Cerent Corporation

» see cerent.com as it lived, on the wayback machine

~ the last words ~

Cisco announced on 26 August 1999 that it would buy Cerent Corporation of Petaluma, California. Under the terms, 100 million Cisco shares would be exchanged for everything in Cerent that Cisco did not already own, and at the previous day's closing price of $68.625 that came to approximately $6.9 billion. The same release picked up Monterey Networks of Richardson, Texas for about $500 million more and put the pair at a combined $7.4 billion.

Further down, in the flat back-of-the-page register these documents use, the release noted that Cerent had been founded in 1997 and had 287 employees.

Cisco's next quarterly filing put real numbers on what it had bought. For the three months to 30 October 1999, Cerent produced $36 million of revenue and lost $15 million doing it, against a blank in the revenue column for the same quarter a year earlier. Cisco itself turned over $3,877 million in that quarter. The deal completed in November, about 98.1 million shares went out, it was booked as a pooling of interests, and the Cerent name stopped being used.

Equipment at this layer never had a face. The first time a 33.6k connection held steady at my house, the call went into a telephone exchange and from there across fiber that somebody's multiplexer was grooming, and not one vendor's name in that chain meant anything to me at the time. Cerent is a part of the internet most people only encounter by reading what it cost.

~ the record ~

~ what the 454 did ~

The Cerent 454 was a SONET add-drop multiplexer. It sat on a fiber ring and pulled individual circuits out of a large one, anything from an OC-192 down to a single DS1. The boxes that came before it could do that and nothing else, so moving IP packets around a carrier network meant terminating the circuit outside the box and handing it to a router. That was two pieces of equipment and two claims on floor space in an exchange where floor space was the scarcest thing in the building.

The 454 took data cards in the same chassis, so packets could be switched or routed without leaving it, and carriers bought one box where they had been buying two. The other unusual decision was the management interface, which ran over TCP/IP with a web server built into the unit at a time when telecom gear was managed over OSI networks as a matter of course. The reasoning is credited to Chip Roberson and it was mostly about money: the embedded operating system from Wind River arrived with a TCP/IP stack already inside, and paying to acquire and support an OSI stack was more than a young company wanted to spend.

~ the other half of fiberlane ~

Cerent did not start as Cerent. It began in 1997 as Fiberlane Communications, funded by Kleiner Perkins with Vinod Khosla as the managing partner on the deal, and it was assembled in three places at once. Systems work sat in Petaluma. The chip designers were in Mountain View, and the network management software people were up in Burnaby, British Columbia.

In early 1998 it split in two: Petaluma became Cerent, while Mountain View and Burnaby became Siara Systems. Both halves were sold within four months of each other in 1999, Cerent to Cisco in August and Siara to Redback Networks in November for $4.3 billion. Together that is $11.2 billion of stock out of one venture round, and both names were out of use within a few years.

~ what the box earned ~

The 454 was rebranded as the Cisco ONS 15454 and became the answer Cisco gave whenever anyone asked whether the price had been sane. Light Reading went back to that question in September 2001 and carried analyst estimates of roughly $100 million of sales in 1999, rising to somewhere between $700 million and $900 million in 2000 depending on which firm you asked. By the time that piece ran, the shares Cisco had issued were worth about $3.2 billion, less than half their value on the day of the announcement.

The people carried on. Carl Russo had run Cerent from April 1998, stayed at Cisco as an optical executive until 2002, and became chief executive of Calix in 2003, a Petaluma company founded in the same month the Cisco deal was announced. The 15454 itself kept shipping into the 2010s under a product number.

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