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Tellium Files for $250 million IPO

Tellium Inc., the young turk in the optical switch-making space, filed for a $250 million IPO Friday on the heels of a multi-million dollar, multi-year strategic agreement with Qwest Communications International Inc. and the successful July IPO of rival Corvis Corp.

Tellium filed the registration statement with the Securities and Exchange Commission Friday. The company is seeking a listing on the NASDAQ exchange under the symbol TELM. Goldman Sachs & Co. and Thomas Weisel Partners LLC are the co-leading underwriters. The number of shares to be offered and the price range have not yet been announced but the company said the estimated offering amount is $250 million.

Tellium was founded in 1997 by optical experts from Bellcore. It develops and markets intelligent optical switching solutions for public telecommunications networks. In the beginning of September Tellium began to ship its new Aurora Optical Switch to high-capacity carriers. The scalable optical switch reportedly delivers 1.28 terabits of capacity with interfaces that range from OC-48 up to an incredible OC-768. The new switch offers a 16-fold increase in capacity over the company's previous model.

The company is the first to market with an optic solution that supports 512 OC-48 connections in its initial configuration. The switch, coupled with its StarNet Operating System and Wavelength Management System, provides customers with a migration path from Tellium's current family of Aurora intelligent optical switches to scale up in port counts, bit rates per port, and raw capacity.

Tellium faces some stiff competition in a market that already has a number of players. Aside from Corvis , whose stock rocketed up 135 percent when it went public, Tellium is in head-on competition with Sycamore Networks Inc. and Ciena Corp. as well as market-leader Cisco Systems Inc. Other high-speed companies, including Nortel Networks Corp. and Lucent Technologies Inc. , are working feverishly to develop similar equipment.

Still, spunky companies with innovative technologies can make room for themselves in the optical arena.

"There's a tremendous amount of competition," said Rudy Baca, an analyst with Precursor Group. "The past few years, however, have seen the development of markets in which smaller players can bring new technologies and have them adopted quickly."

Baca explained that there are opportunities for innovative companies because there is a lot of uncertainty as telecoms try to decide whether they should update switches, acquire broadband or put out other new technologies that are being developed.

"The providers themselves are not sure how the networks are going to develop or at what pace," Baca said. However, Baca said he doesn't have doubts about the future of optical switching markets. "We feel that it is likely to be a very solid growth market."

Jay Patel, senior analyst of the Carrier Convergence Infrastructure Group of The Yankee Group, said optical is a promising technology because it allows for very high capacity data transmission.

"It's a promising technology because it can eliminate a lot of the bottlenecks on the Internet," Patel said.

Baca agreed, "It appears that the optical switching market is really where the networks are going. That is really the most efficient and the most technologically sound choice.

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