A surge in Internet traffic is driving a modest rebound in Sonoma County's Telecom Valley, where network equipment makers are launching new products, growing sales and attracting investors.
It's a positive sign in a struggling economy, but it hasn't led to significant hiring yet. Companies are waiting to see if the turnaround takes hold before they bring new workers on board.
"Right now, we're being cautious," said Henry Wasik, CEO at Force10 Networks in Petaluma. "We're waiting until the last minute before we add staff."
Still, Force10 and other Telecom Valley companies are seeing stronger demand for their technology. Force10's sales for the quarter ended June 30 jumped 24 percent from the first three months of the year.
Growth continued in the period ending Sept. 30, Wasik said, although Force10 didn't release an amount.
Global Internet traffic is growing 40 percent annually and it will jump five-fold between 2008 and 2013, according to Cisco Systems, the world's largest maker of network gear.
Wireless activity -- using smartphones and other mobile devices -- is the fastest-growing segment, doubling every year, according to Cisco's study. Internet TV, video on demand, file sharing and other video applications are taking up ever more bandwidth, it said.
System operators must add capacity to keep pace, fueling sales at Force10 and other Telecom Valley equipment suppliers.
"So much is going online, and that's driving a lot of growth for us," Wasik said.
Force10 makes switches, routers and digital access platforms that help carriers deliver voice, video and data over their networks.
On Tuesday, Force10 announced a deal to provide its technology for the Japan Internet Exchange (JPIX), which handles traffic for the region's Internet service providers. Terms of the deal were not disclosed, but JPIX officials said Force10's equipment will help them meet demand for higher bandwidths.
Force10 merged last March with Petaluma's Turin Networks, creating a new company with 1,300 global customers, 650 employees and a broader portfolio of products.
Turin focused on the North American carrier market, and the merger with Force10 gives it access to new customers in Europe, Asia and other regions, Wasik said.
San Jose-based Force10 has about 100 workers at the former Turin headquarters in Petaluma. It also has locations in Boulder, Colo., and Plano, Texas.
The private, venture-backed company doesn't release quarterly financial results, but Force10 generates more than $200 million in annual sales, according to the Wall Street Journal.
In August, Force10 reported raising $30 million in private equity, bringing its venture funding to more than $600 million since Force10 and Turin launched in 1999.
Force10 isn't the only Telecom Valley company attracting investors. In August, Petaluma's Calix Networks announced it raised $50 million in new venture capital.
Calix is growing despite the recession, company officials said, adding 80 customers over the past year and posting more than $250 million in sales in 2008, up 29 percent from 2007.
Calix will use some of its fresh capital to move into new markets, including cable network and wireless access, the company said.
Last month, Calix announced a deal with U.S. telecom provider CenturyLink to use Calix optical terminals for mobile transmission in 33 states.
Meanwhile, Petaluma startup Cyan Optics rolled out its product portfolio last month. Cyan is headed by industry veteran Mike Hatfield, who started Calix and co-founded Cerent Corp., sold to Cisco in 1999 for a Telecom Valley record $7.3 billion.
Cyan, incorporated in 2006, has raised almost $35 million from venture funds.
Force10, Calix and Cyan stand to gain from the $7.2 billion U.S. broadband stimulus program signed into law by President Barack Obama in February. The program provides grants and loans to rural phone companies to expand their broadband networks.
Only about 38 percent of America's rural homes have access to high-speed Internet connections, compared to 57 percent of city dwellers and 60 percent of suburban residents. Rural network operators are applying for the stimulus funds now, and they'll start flowing in early 2010.
All three Telecom Valley companies focus on Ethernet, a digital transmission technology that's gaining ground among network operators.
"It's high capacity, takes less space and uses less power," said Michael Howard, principal analyst at Infonetics Research, a Silicon Valley consulting firm that tracks the telecom industry.
Carriers are competing to provide the highest speeds and latest applications, he said. Over the next five years, network operators will spend $146 billion on Ethernet equipment, according to an Infonetics Research forecast, with major investments in routers, switches and optical gear.
"If they don't spend on their networks, they may become out of date," Howard said.
Telecom Valley also is home to Cisco, Alcatel-Lucent and Tellabs, large public companies that operate network engineering facilities in Petaluma.
All three companies downsized their local operations since the technology crash of 2001, but they're also on the rebound, said Simon Leopold, a telecom analyst at Morgan Keegan in New York.
"In this economy, everybody's taken it on the chin," he said. "But if you look at the public companies in this space, they've actually performed pretty well since March.
"Networking is still a fundamental business. It isn't going away."
-- You can reach Staff Writer Steve Hart at 521-5205 or steve.hart@pressdemocrat.com.
UPDATED: Please read and follow our commenting policy: