IPO Talk Twirls Around Topspin

Mountain View, Calif.-based startup Topspin Communications Inc., is a solid IPO candidate, thanks to its position in one of the hottest departments of the data center market, according to analysts.

At a time when companies are looking to pool their resources through grids and clusters, connectivity is proving to be a major issue for data center managers (see Philadelphia Stories). Analysts believe that Topspin, which provides switches and software to link servers via a range of data center protocols, is well positioned to exploit this growing trend.

Arun Taneja, founder of analyst firm Taneja Group., says, I think that we are going to start seeing IPOs starting towards the end of this year. Topspin could be a candidate for something like that.”

For Taneja, the company's background in InfiniBand will be key. “The way things are shaping up, I think that InfiniBand will have a larger play in some of the wider architectures, like Sun’s N1, IBM’s On Demand, and HP’s Adaptive Computing,” he says.

John Humphreys, research manager for high-performance computing at IDC, has also been tracking the company's progress with interest. "Topspin has picked up on the grid computing and the utility computing trend," he notes. "They could be a leading candidate for an IPO, or even an acquisition."There is certainly plenty of buzz around Topspin at the moment. Since its founding in 2000, Topspin has amassed around $70 million in funding, and it's spent the past year collecting OEM partners like baseball cards.

These include Sun Microsystems Inc. (Nasdaq: SUNW), IBM Corp. (NYSE: IBM), Dell Computer Corp. (Nasdaq: DELL), NEC Corp. (Nasdaq: NIPNY; Tokyo: 6701), Hewlett-Packard Co. (NYSE: HPQ), and RLX Technologies Inc.

In addition to the OEM agreements, Topspin has also won some notable enterprise deals with Prudential Financial and Burlington Coat Factory.

The company’s core technology comprises server switches that provide InfiniBand, Ethernet, and Fibre Channel connectivity between servers. These are supported by a range of products including a host channel adapter and server virtualization software.

David Freund, analyst at Illuminata Inc.,believes Topspin’s ability to link different data center protocols will prove key: “They have a system that will essentially bridge a lot of data center products, so that you can get into a new protocol such as InfiniBand, for example, without having to change your entire data center infrastructure.”The company, which was set up by entrepreneurs Ross Schibler and Keith Wilkinson, is headed by Krish Ramakrishnan, the former VP and general manager of Cisco Systems Inc.'s (Nasdaq: CSCO) Content Business Unit.

Stu Aaron, vice president of marketing at Topspin, says there are no plans afoot for another funding round. "We believe that we're well funded, the revenue is starting to ramp, so we don't, at this point, intend to raise another round of funding."

Topspin is not, of course, the only player in this space, and Taneja believes that rival vendor Voltaire Inc. is also well positioned to exploit growing interest in InfiniBand. For one thing, Voltaire has the largest server switch on the market -- the 288-port ISR 9288. Topspin’s largest switch, the Topspin 360, has 96 ports.

This reflects the different foci of the two startups. Although Voltaire has already bagged OEM deals with the likes of Hitachi Ltd. (NYSE: HIT; Paris: PHA) in Japan, Apple Computer Inc. (Nasdaq: AAPL), and IBM, the company has devoted a great deal of its energy to establishing a footprint in the high-performance computing space.

Arun Jain, vice president of marketing at Voltaire, says, “We did not want an OEM-heavy business model, because the revenue generation takes longer, so we have been generating revenues from high-performance computing as well.”Nonetheless, Jain promised that we will see Voltaire signing more OEM deals in the future.

A third vendor, InfiniCon Systems Inc., is also playing in this space, boasting Fujitsu Ltd. (OTC: FJTSY; Tokyo: 6702) and China’s largest server vendor, Langchao Group, as its OEM partners. Like Voltaire, InfiniCon has also devoted much of the past year to boosting its presence in high-performance computing sites, to date achieving more than 70 deployments of its technology around the world.

Topspin’s VC funding appears to have given the company the financial breathing space to aggressively seek out OEM deals. Voltaire and InfiniCon have so far amassed, respectively, $50 million and $48 million.

Tony Prigmore, senior analyst at The Enterprise Storage Group Inc. believes that Topspin has time on its side. He says, “There is plenty of time for them [to IPO]. If the IPO happens, then great; but if they don’t, then they have the funding in place to continue to deliver their roadmap.”

— James Rogers, Site Editor, Next-gen Data Center Forum0