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Blade Network nabs $10m in funding

Shy server maker kicks in some dough

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Blade Network Technology - the blade switching business that was mercifully spun out of Nortel Networks before the Canadian firm collapsed - has locked down some Series B funding to help it bolster its business of selling switches for blade server chassis, and expand out to top-of-rack switches.

In this second round of funding, Japanese server maker NEC led the way and was joined by Juniper Networks, one of the key suppliers of 10 Gigabit Ethernet switches. It also included Garnett & Helfrich Capital, which bought the business from Nortel in 2006, when the capital markets were a little more liquid.

An unnamed third party infrastructure supplier also kicked in some of the $10m in the Series B round, but was apparently too shy to admit it. This was almost certainly IBM, which inked a cross-patent licensing agreement with BNT back in April and which is one of the big resellers (if not the biggest) of BNT's blade switches. It could possibly be Hewlett-Packard, of course, which resells BNT's switches, or Verari Systems, which also sells BNT's products.

Vikram Mehta, BNT's president and chief executive, said that when NEC led this financing round, as part of its due diligence it calculated a valuation of the privately held company. It reckons that BNT is worth about $230m.

It might seem a bit perplexing as to why Juniper Networks is interested in putting money into BNT, which is one of its rivals in the data centre. Then again, Juniper might need to resell BNT blade switches so it doesn't have to engineer its own. Mehta was coy about what Juniper was planning.

Mehta was similarly coy about BNT's financial performance, but gave some hints as to how well the switch maker is doing despite being relatively young and despite the economic downturn. In the third quarter of fiscal 2009 ended in July, BNT had 31.5 percent revenue growth year-on-year. Mehta said that BNT was generating cash flow from operations, that the third quarter was "handsomely profitable," and that the company was now at an annual revenue run rate exceeding $100m.

By the way, Nortel still owns a stake in BNT, which Mehta characterized as "less than 20 per cent." Nortel's creditors are looking for assets after the Canadian networking giant went bankrupt in January. ®

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