>
> One For The Record Books
>
> J M Shenoy in Boston
>
>
> Diwali came a bit early this year for Gururaj 'Desh' Deshpande. For,
on
> Friday, Deshpande, 48, found himself a billionaire when the share
price of
> his Sycamore Networks rose to five times its original value.
> It isn't that Deshpande, a product of the Indian Institute of
Technology,
> Bombay, is a stranger to instant success.
>
> For Cascade Communications, founded by Deshpande and Daniel E Smith in
> 1991, had gone public three years later and was bought by Ascend
> Communications for $ 3.7 billion in 1997. It was recently bought by
Lucent
> Technologies for more than $ 21 billion.
>
> But the response to the initial pubic offering by Sycamore Networks,
the
> 18-month-old firm he heads with Smith as the chairman, has still
astounded
> business circles.
>
> The Chelmsford, Massachusetts-based firm makes sophisticated optical
> switches whose fiber-optic connections are designed so that software
can
> easily manage it.
>
> It is a company that Fortune magazine said early this year would "do
> nothing less than change the nature of the Internet".
> Sycamore's share price exploded fivefold, from an opening price of 38
to a
> close of 184 on Friday, making it worth $ 14 billion, and setting a
record
> for the highest market value achieved by an Internet company in its
first
> day of trading.
>
> While the biggest first-day percentage gain for an IPO was 606 percent
for
> theglobe.com, an online community, last November, said Jay Ritter,
> professor of finance at the University of Florida, on an absolute
dollar
> basis, Sycamore's increase of 146 is the largest ever first-day gain.
Its
> market capitalization is also the highest realized by a company on its
> stock market debut.
>
> The result was that within a few hours, Deshpande, and Smith, 49, had
> become billionaires.
> Companies like Sycamore that have achieved impressive IPOs in recent
> months include Juniper Networks Inc in California, which started at 34
a
> share in June and closed on Friday at 261. California-based Redback
> Networks Inc, which began at 23 a share in May ended trading 1201/16,
> while Foundry Networks Inc, also in California, went public at 25 a
share
> and closed at 16213/16, also on Friday.
> ''Just like 20 years ago when the economy was driven by oil, the
economy
> for the next 25 years will be driven by the networked economy,''
Deshpande
> told reporters.
>
> Deshpande, who owns 16.3 million Sycamore shares, is worth about $ 3
> billion, while Smith's 14.7 million shares are worth about $ 2.7
billion.
> 'One product. One customer. Billions of Dollars', screamed a headline,
> referring to the only one major customer the Massachusetts-based
Sycamore
> has till now. The firm earned about $ 11 million this year.
> "Another moonshot born and a couple more billionaires coined,'' said
John
> Fitzgibbon, who covers IPOs for Red Herring, a financial magazine.
"It's
> one for the record books, and one for legend. All the stars and
planets
> came together.''
>
> Today, Sycarmore is Massachusetts' fourth-highest-valued company,
towering
> over Staples Inc, Raytheon Co, and TJX Cos, operator of TJ Maxx
clothing
> stores.
>
> Calling the response to Sycamore IPO "amazing" and "astounding,"
analysts
> said the enthusiasm for Sycamore is the latest in the continuing saga
of
> success stories for Internet-related firms, and resulted from a strong
> demand for a relatively limited supply of such stock.
> Even in a year considered great for IPOs of networking companies
including
> Redback Networks and Cisco Systems, Sycamore's gain was huge.
> Experts believe that the huge reception for Sycamore's IPO is based on
the
> potential for the optical networking market, which is still nascent,
> coupled with the value of Deshpande and Smith's leadership and track
> record.
>
> The two proved at Cascade that they knew more than building a
prototype
> and selling it. They also know how to run a company successfully,
several
> experts including Joseph Lassiter, Harvard management professor, said.
> Deshpande was named by several publications including Red Herring, one
of
> the top ten entrepreneurs of 1999.
>
> Sycamore made Red Herring's 1999 list of the 100 top companies in the
> digital economy. Fortune magazine named it among the 12 Cool Companies
of
> 1999. Referring to its shipment of its product in less than a year
since
> the company was founded, Fortune said no other firm, "not Cascade,
Ciena,
> Cisco has left the starting gate so quickly."
>
> Sycamore shipped its first product, the SN 6000, to Williams
> Communications Group, based in Tulsa, Arizona five months ago. The
deal
> was worth $ 24.5 million.
>
> Deshpande, who has a master's degree in electrical engineering from
> University of New Brunswick in Canada, and a PhD in data communication
> from Queen's University, also in Canada, is known not only for his
sharp
> business vision but also his mentoring part in The IndUS Enterprise, a
> south Asian networking organization.
>
> "He is firmly committed to grooming a new generation of investors and
> CEOs," says Dr Dinesh Patel, a Boston entrepreneur who has known
Deshpande
> for many years. "He is one of the most self-effacing people in the
> business."
>
> No surprise then that many reporters who called Deshpande on Friday
found
> him cool and collected. He would rather talk about the possibilities
of
> his product rather than the historic IPO.
>
> "It's an indication of the opportunity that lies ahead," said
Deshpande
> told a reporter as his stock prices were soaring. "People have been
> talking about the networked economy for a long time. What's
fundamental to
> that revolution is bandwidth."
>
> Playing a key role in the success of Sycamore is the venture capital
firm,
> Matrix Management Co, which introduced two MIT scientists to Deshpande
and
> Smith about a year ago.
>
> Matrix general partners Timothy Barrows and Paul J Ferri introduced
> Deshpande to two scientists from the Massachusetts Institute of
> Technology's Lincoln Labs.
>
> Richard A Barry, 33, and Eric A Swanson, 39, had created MIT's
all-optical
> network test bed, and were eager to transform their knowledge of
> intelligent wavelengths into a commercial product for the telecom
> industry.
>
> With Barry and Swanson on the deck, Deshpande and Smith quickly
created a
> team with some of the talents they had hired at Cascade.
>
> What is next for Sycamore?
> He is intrigued by the long-term opportunity, the soft-spoken
Deshpande
> says, rather than see the firm merely as a hot company "that you want
to
> flip and make some money.
> "When I was at Cascade, I had no money," he recalls. "I'm now the
largest
> investor in Sycamore. We believe in the story, and we're fully
committed
> to the long-term potential."
>
Cheers,
rob.
Rob Chandra
Commonwealth Capital Ventures
781.237.7373
781.235.8627 fax
www.ccvlp.com