"$4.5 Billion is No Big Deal"

A $4.5 billion dollar deal certainly isn't something you see every day, not on Wall Street and not in Israel. But when we asked Rajvir Singh, founder and CEO of Cerent, (which came to the forefront during Cisco's wave of acquisitions), he didn't bat an eyelid at the mention of the amount.

"Fiber Raj," as Forbes magazine called him, is a byword in the optic switching and data communications world. Raj, aged 53, hadn't recovered from the sale of Cerent to Cisco, before selling another company he founded, Sierra Systems, to Redback for $4.3 billion. Less than a year later, he was selling a third company, founded by him, Stratum 1, also to Cisco, and ended 1999 with $300 million more in the bank, and a couple of million Cisco shares. When a man like that talks, people listen.

Globes: What's your opinion of the amazing amount paid for Chromatis?

Raj Singh: "It's not a lot of money. Look at the Cerent-Cisco deal and you'll see that $4.5 billion in no big deal. Moreover, what's important is the power the deal gives Lucent in a field where it is very weak, optic switching and optic network management".

How do you explain the fact that a major company like Lucent couldn't come up with what one little start up from Israel did?

"Large companies, rich and focused though they may be, can't produce developments at the rate that a start-up can, therefore, they're forced to acquire them. Israel has attracted a lot of attention as a technology center, and the Lucent-Chromatis deal is one example".

Do you think the price Cisco paid for Cerent was justified?

"Definitely. When we sold Cerent to Cisco, we had $2.2 million for the first quarter [of 1999 - E.A.] and $7.5 million for the second. In the third quarter we forecast sales of about $25 million [for 1999 - E.A.], and $300 million for all of 2000. Today, Cerent sells at an annual rate of about $1 billion, which means that Cerent actually sold for a low price, not a high one.

"When you have a combination of a super-advanced product, and a huge sales infrastructure, you get amazing financial results. That means the acquisition price was both logical and justified, if you taken into account what it gives the buyer: Lucent gets a solution it lacks; the sale of additional components to clients is dependent on this solution. Clients buy complete solutions, not products they have to assemble, so Chromatis fits into the Lucent rubric. Perhaps, from a purely economic viewpoint the deal looks expensive but you have to look at what this gives Lucent; for Lucent, it's worth it".

You're active in the world of optic switches. What do you know about Chromatis?

"I was supposed to come to Israel to meet with them, and examine possible investment in the company. But unfortunately, I was busy with other things and didn't have time to meet the Chromatis people".

Are you sorry you missed out on a chance to make a huge profit in a short time?

Absolutely not. I've done other deals, and I believe I'll earn no less from them, like the Kagoor of Israel investment".

What's Kagoor?

Kagoor Networks is a start-up founded by three Israeli entrepreneurs out of VocalTec and Class Data, which was acquired by Cisco. The company has developed a product that solves a number of problems created in Internet telephony when it reaches the massive capacity that's expected. Kagoor raised $2.5 million from angel investors in Silicon Valley and Asia, and is now in the final stages of a second fund-raising round from leading US venture capital funds like ComVentures, which invested in Israeli start-up P-Cube.

"$4.5 Billion is No Big Deal"

Cerent founder Rajvir Singh isn't too worked up about the Lucent- Chromatis deal. "For Lucent, it's worth it" he says - and goes on to talk about his investment in what could be Israel's next star start-up.