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Investors in Solarflare Communications Inc. aren't shrinking from what may go down in venture capital lore as the last stand of the heavily capitalized chip startups. Financial backers are dropping another $18 million on the company, which they believe has a lead in developing10G Ethernet chips to power the next generation of servers and switches. The Internet bubble saw massive investment in proprietary silicon for all kinds of telecommunications products. Perhaps the biggest bust was in products for specialized standards, such as InfiniBand and Fibre Channel technology, that sought to replace Ethernet as the dominant connectivity standard. Some of those companies remain in specialized niches, but high-speed Ethernet remains as the last stand for heavy investment, even as the whole chip development industry is heading toward cheaper startup costs ,and virtualization software development threatens to reduce the role of proprietary silicon. But little more than a year after merging startups SolarFlare and Level 5 Networks Inc., Oak Investment Partners, Foundation Capital, Accel Partners and Amadeus Capital Partners have put additional capital into the combined company, bringing total investment to $126 million. The new money will support sampling of a second-generation 10 Gigabit transceiver chip to power line cards and switches and continue developing a more comprehensive motherboard product it expects to introduce in 2009 for inclusion in servers that would debut in 2010. Bob Wheeler, a chip industry analyst with The Linley Group, says SolarFlare has distinguished itself as the leader in 10G chips, but notes the area is gerting crowded. He predicts a shakeout. "That is a boatload of money for a chip startup," Wheeler says. "They have a lead in the sense of a proven, mature product, but it's a horse race on whether the startups can execute and create a need for the big guys to acquire someone. The market clearly is not able to support five companies." SolarFlare was the first company to produce 10G connectivity chipsets for high-speed Ethernet, followed by Teranetics Inc., and it has released a second-generation product on a single chip that dramatically reduced power consumption. Teranetics has announced a second-gen product, and startup Aquantia Inc. has announced a first-gen product, but those have yet to be released. Meanwhile, incumbent connectivity chip developers Marvell Technology Group Inc. [MRVL] and Broadcom Corp. [BRCM] are feverishly working to develop competing products, with Broadcomm making samples available, but without disclosing crucial power statistics. With $126 million in, it's easy to see how Solarflare investors aren't about to look back now, and the company says it didn't even consider bringing new investors into the current round. But with the amount of money already into development, they must be hoping that incumbent players will stumble in their own development and that their lead on other startups is significant enough to leave them as the last company standing. -- Clifford Carlsen See June 17 press release from Solarflare Communications Inc. See Feb. 29 post from Tech Confidential See Feb. 21 brief from Tech Confidential For more see GigaOm, seriouslytech.com and Southern California High Tech News
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