Packet Engines specializes in Gigabit Ethernet technology and is currently developing and licensing technology to semiconductor and networking OEMs to help promote the Gigabit Ethernet market. The company is also becoming a strong player in the Fast Ethernet market. Packet Engines plans to introduce its own hardware, Gigabit Ethernet Full Duplex Repeaters and Switches, by the middle of 1997. IC designs and Intellectual Property will be licensed to other companies. While a 100Mbps backbone was adequate in an 10Mbps Ethernet environment, a Fast Ethernet LAN requires a proportionately faster backbone to meet the increased performance demands. Packet Engines believes that Gigabit Ethernet will become the campus backbone of choice replacing older, slower FDDI backbones and eliminating the need to switch to ATM. Battery Ventures and the Mayfield Fund have provided $7.5 million in first round funding.

The company is the driving force behind Gigabit Ethernet and hosted the first industry meeting in Oct. 1995. Packet Engines has a world-class management team that appears to be fully capable of the challenges that await them. The president was a founder of 3com, Tidewater Design and Grand Junction (sold to Cisco for $375M) and has a proven track record of success. He was also a driving force in promoting the Fast Ethernet standard. Packet Engines is clearly positioned to become a major force in the Gigabit Ethernet market.

For a small company, Packet Engines has quickly made itself well-known and respected. The management team is powerful, experienced and connected. The company is also using several techniques that are becoming prevalent as the boundaries between system, chip and IP companies blur. First, the company is highly active in the Gigabit standards committee and was a founding member of the Gigabit Ethernet Alliance. Second, the company is licensing its technology to generate an early revenue stream and to jump-start the Gigabit Ethernet market. Finally the company will introduce its own hardware which, if all goes according to plan, will have a market ready to embrace it. We're not quite sure how to capitalize on Packet Engines. Perhaps IP sales, chip sales from companies that have licensed the technology such as MMC Networks (to be profiled in the next issue), hardware sales, or potentially the IPO at the end of the rainbow. Surely there is a way, since the market is exploding. Dataquest recently forecasted the Gigabit Ethernet market to grow from zero in 1996 to $2.9 billion in 2000.