European network start-up

LDCOM

says it will buy optical switching gear from

Sycamore's

(SCMR)

new metro device maker

Sirocco

, marking a quick return on Sycamore's pricey acquisition.

Terms of the deal weren't disclosed, but Sycamore says LDCOM, a French wholesale Internet service provider, is extending a previous contract by purchasing a new line of Sirocco products developed for the metro, or on-ramp access, points in the network.

A Sycamore spokesman said no vendor financing was involved in the transaction, meaning Sycamore didn't help fund the sale of its equipment.

The deal helps validate the steep $2.9 billion price Sycamore paid for Sirocco in an all-stock transaction that closed last month. The sale also notches another win for Sycamore's optical switching technology, signaling that the company still has a hand in the game as rivals such as

Ciena

(CIEN) - Get Report

continue their hot streak. Sycamore was up $5, or 7%, at $75 as the

TheStreet Recommends

Nasdaq

rallied sharply Thursday.

Know When to Hold 'Em

In June, the Chelmsford, Mass.-based company staked 11% of its overall market value on its agreement to buy Sirocco. At the time, it was seen as a

high-risk gamble on a company with only a couple beta, or prototype, products and no revenue.

Still in the Game?
Sycamore shares lag behind Ciena

Now, less than five months later, Sirocco's products are figuring into a significant sale. Those proceeds could make it onto the books before year-end, well ahead of expectations, says Sycamore's president of business development, Kevin Oye. Sirocco's sales will help offset the dilution cut into Sycamore's bottom line until fiscal 2002.

LDCOM, which was founded two years ago by the Louis Dreyfus Group, is building a pan-European network and plans to offer services in 20 major European cities by mid 2001.

Leapfrogging

The Sirocco gear represents a significant leap in technology. Current-generation equipment from companies such as

Cisco's

(CSCO) - Get Report

Cerent division is due for an upgrade. Cerent's strength is with SONET, or synchronous optical networking -- a redundant fixed ring-based network structure thought to be an inflexible bandwidth hog. Currently preferred are mesh-structured WDM, or wave division multiplexing, systems. Outfits like Sycamore, Ciena and others are pressing ahead in the next leg of the derby.

Nearly all the new-generation devices attempt to combine SONET capabilities with WDM and other formats.

Sirocco's optical devices sit at the edge, typically in cities, in the so-called metro segment of the network. These junction boxes help merge local traffic to the Internet's expressways.

Ciena already counts eight customers for its metro system products, including two large European networks.

At this stage in the Internet's shift from electronic to optical switching, there appears to be plenty of business to go around. A small win is still a win, say analysts, but more important is showing you are in the game.