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September 2000 Polishing the diamond business - Business Week Juniper - The upstart thats eating Cisco's lunch - Business Week India claims it has hottest chili in the world - Chicago Tribune Sun research program through IIT's - Reuters Polishing the Diamond Business Every day, in a third-class carriage of the express train that rolls between Bombay and Ahmedabad, plainly dressed couriers carry precious cargo: diamonds. Rough gems are imported to Bombay from dealers in London, Antwerp, Tel Aviv, and New York, taken by these couriers to cutting and polishing centers in Gujarat state, and then carried back to Bombay to be re-exported to the world. This system, based on trust, secrecy, and skilled low-cost labor, has been working for half a century with barely a mishap. It has helped make India the world's premier center for diamond cutting and polishing. Nine out of every 10 stones sold in the world pass through India, making diamonds that country's largest export, at $6.6 billion a year. But recent scandals have rocked the industry and exposed flaws in the old ways of doing business. In June, a courier absconded with an estimated $10 million worth of diamonds and cash. Then, two diamond traders in Bombay used clients' money to speculate on stocks and lost it. Shamed, they committed suicide. This came on top of alleged misappropriation of funds, two years ago, by the developers of a modern, $250 million diamond bourse in Bombay, who abandoned the monument to India's modern industry. As a result, diamond merchants are in shock, and some are realizing they must professionalize or risk losing out in the growing, $12 billion global diamond business. ''All these years, we have built up the industry in an unprofessional manner,'' says Vasant Mehta of diamond traders V. Rameshchandra & Co. in Bombay. ''But now we need to organize to stay competitive.'' Indeed, change has come slowly to an industry dominated by family control and entrenched ways. Diamond merchants--mostly religious Palanpuri Jains, a small community from Gujarat--have long trusted their wares only to family members and a few outsiders. Bombay-based Karp Impex, for example, which won an award for exporting $100 million worth of diamonds last year, is run by the brothers and cousins of one clan. And although these clans operate multimillion-dollar enterprises, most members have only a high school education. These dynasties are starting to recognize the need for change. If they modernize, the resulting profits could be enormous. De Beers, the longtime monopolist, is finding its cartel usurped by Canada, Russia, and Australia, which want to go directly to diamond-cutting centers without using a middleman--a move that could raise India's current 55% share of the world diamond industry. India is also moving into larger stones, currently the preserve of Belgium and Israel. Thus Raj Kishore Karur, head of the Indian diamond desk at ABN-Amro Bank, which handles a quarter of the world's diamond trades, expects ''50% of Israel's diamond [cutting] to move to India over the next three years.'' To handle it, India is importing more sophisticated machines and cutting lasers. According to the Gem & Jewellery Export Promotion Council, the country's 1 million diamond cutters now handle up to 40 stones a day, twice that of a decade ago, at a cost of less than $1 each. CYBERDESIGN. Companies also are taking steps toward more professional management. Kunal Mehta, a partner in Diatrends, a Bombay-based diamond cutter and jewelry maker started by his grandfather, began signing up trained managers this year when relatives had difficulty understanding such terms as production planning and quality control. He has doubled his workforce to 120, hired an engineer to run the factory, and replaced his wife and cousins as jewelry designers with a professional who uses a computer rather than sketches.In July, after years of lobbying, India became a member of the World Federation of Diamond Bourses, which sets industry policy. That will allow Indian merchants to trade on the federation's 22 diamond exchanges worldwide, vastly expanding their markets. India hopes to have its most visible sign of progress, the diamond trading bourse in Bombay, completed three years from now. The exchange will be the world's largest, bringing under one roof India's 2,500 trading firms, banks, airlines, customs offices--even courier services. Not the absconding kind, of course. Juniper: The upstart that's eating Cisco's lunch In early 1999, Chris J. DeMarche, chief technology officer at Internet service provider Verio Inc., was frantic. He desperately needed more capacity in smaller cities like Spokane, Wash., and Rochester, N.Y., but Net equipment giant Cisco Systems Inc. wouldn't make the gear he needed. DeMarche had to have routers--the equipment directing Net traffic--that would run on low power levels because his network centers were already overloaded. After months of waiting for Cisco, DeMarche turned to Indian-born co-founder Pradeep Sindhu's Juniper Networks Inc. The upstart offered him a Net router that was faster than Cisco's rival model and used about two-thirds the power. Just like that, Cisco was shoved aside as Verio's main supplier. ''They weren't listening,'' DeMarche says. Fast-forward to today: Little Juniper is suddenly on the cusp of smashing mighty Cisco's dominance over the market for big Internet routers. It seems Verio wasn't alone in its frustration. Juniper has been stealing one big-time account after another. The latest scores are stunning. Juniper's share of the high-end router market hit 22% at the end of June, up from 17% at the end of the March quarter, according to market researcher Dell'Oro Group. Over the same period, Cisco's share dropped to 75% from 80%. And pundits think the latest data are no fluke. ''The only way Cisco is going to catch them is if Juniper screws up,'' says Brendan Hannigan of Forrester Research Inc. Investors love the company. It's viewed as something of an ''anti-dot-com,'' thanks to the outlook for real revenues and profits. Analyst Martin Pyykkonen of CIBC World Markets expects Juniper will grab at least 25% of the high-end router market by yearend. Sales are expected to reach $500 million this year, up from $100 million last year, and net income should come in at about $100 million. With such prospects, Juniper has seen its stock soar 245% this year, to $196, creating a market cap of $62 billion. How has Juniper done it? After all, this is Cisco we're talking about, the company that has earned every penny of its $466 billion market cap by crushing competitors that cross its path. Juniper CEO Scott Kriens attributes his company's success to a simple philosophy: ''survival of the focused.'' The company has always had the single goal of building high-end equipment that would route traffic across the largest Internet backbones. In other words, it makes gear for the giant phone companies and Internet service providers that handle the bulk of Net traffic. It doesn't worry about the data needs of corporations, which are the heart of Cisco's business. ''We were the first and only company built from scratch to solve the problem of how to connect billions of users over the Internet,'' Kriens says. That focus started from the very beginning. When co-founder and Chief Technology Officer Pradeep Sindhu started recruiting engineers in 1996, he grabbed industry veterans with the kind of expertise needed to attack the very top of the router market. Some, like Sindhu, had designed microprocessors at Sun Microsystems Inc. or Xerox Corp.'s famous Palo Alto Research Center. Others had built routers for Cisco and Bay Networks. Together, they made products with the processing power of big servers and the intelligence of Cisco's best routers. SPEED MERCHANT. Juniper boasts faster machines in a more compact package. Its top router can process data at 10 gigabits a second, four times the speed of Cisco's best machine. So even though Juniper's biggest machine costs $400,000 on average--twice the price of Cisco's--customers can't get enough of them. That's a rude awakening for Cisco, which didn't need the fastest routers when it was zeroing in on just the corporate market. Whenever rivals like 3Com came along with more powerful boxes, Cisco just offered its customers deeper discounts on older, slower machines. That meant customers could get the same number of bits processed per buck--and kept them from switching suppliers. Cisco usually waited to introduce faster routers until it felt that a broad segment of the market was ready for them. That approach, however, has hampered Cisco in selling to telephone companies and Internet service providers, a market it's trying to crack. For those kinds of companies, technology is everything. They're facing such a flood of Net traffic that they're adding capacity as fast as they can. Huge customers like Britain's Cable & Wireless PLC and WorldCom Inc. say that price is much less important than blazing speed. WorldCom's UUNET division, the largest Net backbone provider in the world, has switched to Juniper as the main supplier at the core of its network. ''We have to buy the best of breed,'' says Michael O'Dell, UUNET senior vice-president of technology. ''We put the boxes through their paces, and there was one clear winner.'' Cisco has reason to worry: Juniper is taking share in the fastest-growing segment of the market. Router sales to phone companies and ISPs are projected to soar about 200% yearly, to $6 billion in 2001, according to Dell'Oro. By contrast, the corporate market is increasing about 30% annually, to $18 billion in 2001. With that kind of money on the line, you can just imagine Cisco CEO John T. Chambers plotting to wipe out the upstart from Sunnyvale, only miles away from Cisco's own offices in San Jose, Calif. But to the outside world, Chambers is the picture of calm. ''Juniper is the best thing that ever happened to us,'' he maintains. Without being pushed by Juniper, Cisco wouldn't have developed its most powerful router as fast as it did, he says. Cisco sold more than $1 billion worth of those machines during the past fiscal year, about 10 times more than Juniper. Cisco execs say they won't let a rival drive their product-development plans, but they aren't dismissing the startup either. ''We took them seriously when they got 1% of the market,'' says Larry Lang, Cisco's vice-president of service-provider marketing. In part because of pressure from Juniper, the company plans to begin trials of a 10-gigabit router by the fourth quarter. For all its strengths, Juniper does face some big challenges. For one, Kriens recognizes that he must broaden Juniper's product line. The company is working on a more powerful version of both its core router and a smaller product, sources familiar with the company's plans say. Juniper also is keeping the heat on Cisco by taking advantage of the Web. Cisco has used the Net to boost revenue per employee to $653,000, giving it a huge cost advantage over rivals such as Lucent Technologies Inc. that generate only about half as much per worker. Now, Cisco finally faces a rival that is equally Net-savvy. While Cisco gets more than 90% of its orders online and has contract manufacturers build most of its gear, Juniper builds none of its own. The result: Its revenue per employee is more than $695,000. Customers, ever wary of being dependent on a single supplier, seem to relish their newfound choice. O'Dell of UUNET says that the first time he purchased Juniper gear, he did it because he ''finally figured out that the only way to get Cisco's attention was to show them a purchase order with eight zeros and another company's name on it.'' Suffice it to say, Juniper has everyone's attention now. INDIA
CLAIMS IT HAS THE HOTTEST CHILI IN WORLD GAUHATI, India -- Scientists say they have proven that the hottest chili on Earth grows in the northeastern hills of Assam, rather than the farms of Mexico. "Tests by a team of experts here have confirmed that Naga Jolokia, a specialty from the northeast, is now the world's hottest chili," said S.C. Das, deputy director of the Defense Research Laboratory in the garrison town of Tezpur. He said Tuesday that the Naga Jolokia, or capsicum frutescens, surpasses the tongue-burning ability of the Red Savina Habanero, a Mexican chili that has been known as the world's hottest. Das said that the researchers at the lab 110 miles north of Assam's capital, Gauhati, had measured the pungency of the two chilis in Scoville units--the international gauge for food spiciness. Das said the Naga Jolokia measured 855 Scoville units, compared to 577 for the Habanero, in the tests completed last week. The Naga Jolokia grows to about 2 inches long and to a thickness of about half an inch in the hilly terrain of Assam. The native people have been eating them for centuries. India exports 38.5 tons per year of all varieties of chili. The Naga Jolokia retails for about $1 to $1.50 per pound, depending on the quality. Sun research program through Indian institutes DELHI: Computer networking leader Sun Microsystems Inc on Thursday launched a collaborative research program with leading Indian technology institutes. Sun signed agreements with the Indian Institute of Technology's (IIT) Delhi, Kanpur and Kharagpur centres. The IIT at Mumbai and the Indian Institute of Science in Bangalore were also expected to take part in the programme, Sun officials told a news conference. Sun will fund projects on subjects linked to theory, software languages and tools that would enable the creation of technologies to improve the quality and power of network computing. "It (the program) can have an enormous impact on Sun's product line," said Jeff Rulifson, director of Sun Microsystems Laboratories in Europe. Rulifson said Sun liked to be involved with leading technology institutions and was not aware until last year of the huge research base in India. The company then decided to fund research in India. Research subjects will include Sun's Java language technology, which is a key Internet tool. Sun officials did not give financial details of the program. The intellectual property rights generated by the research would be jointly owned by Sun and the institutions, they said. Rulifson said Sun was also willing to share where necessary the source codes that drive basic software in order to benefit the research. The IIT centres are India's leading engineering institutions, and have produced thousands of high-technology engineers. One of Sun's co-founders, Vinod Khosla, now a leading Silicon Valley venture capitalist, is a graduate of IIT, Delhi. |
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