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Tropic Networks Raises US$33M

There appear to be growing indications the telecom equipment market is coming back to life – at least parts of it. So far this week, there have been two large private equity deals – Tropic Networks raised $33-million while Caspian Networks brought in $55-million. They're eye-catching because a year or two ago these kind of deals didn't exist. The idea of putting money into telecom start-ups seemed ludicrous. So what's changed? For one, carriers and cablecos need to start spending money again on new equipment so they can upgrade/expand IP networks and launch new services. In light of the growing battle between telcos and cablecos, niether side has much of a choice in the matter for fear of becoming less competitive. This has created a window of opportunity for small equipment with leading-edge technology to finally attract some business. This has also let them attract new capital from investors who realize there are strategic opportunities in the telecom market. For investors, there are two scenarios: the telecom equipment makers go public or, more likely, they get purchased by large suppliers looking to fill a hole in their portfolios. Tropic's investors include Alcatel SA, which is also re-selling Tropic's technology into the telco and cableco markets. Caspian, meanwhile, has router technology that could attract attention from Alcatel, Siemens and Nortel. For telecom start-ups that managed to survive the three-year downtown, the good times appear to have returned. That said, this is not going to be an across the board party. It will be by invitation only.

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