Fatpipe’s technological advantages may be exaggerated
June 9, 2010
It is arguable that one or the other proprietary (i.e. patented) system may do an activity better than some other, but that won't be an overwhelmingly good reason to invest in the patent owner's IPO
The Rs49-crore initial public offering (IPO) of Fatpipe Networks India is open for subscription. It has fixed a price band at Rs82-Rs85 a share. The issue was supposed to close on 9 June 2010.
However, as of today, Fatpipe has managed to get only 0.73 times subscription on the National Stock Exchange (NSE), thus falling short of the 90% subscription required as per the Securities and Exchange Board of India (SEBI) rules.
Sources close to the development told Moneylife that the company may look at extending the IPO, in the hope of increasing subscription to the issue.
The issue was subscribed 0.33 times yesterday. The retail quota was subscribed 0.04 times from the total 20.91 lakh reserved under this category.
The company is raising money for expanding its US presence and opening marketing offices around the world.
Apart from the various controversies surrounding the company, there is an issue with its technological superiority. Fatpipe claims to hold patents on a technology called 'Router-Clustering', which enables customers to obtain highly redundant and fast Internet or wide area network (WAN) access. It provides global corporations and government offices with technology that increases the security and reliability of Wide Area Networks, corporate extranets, Virtual Private Networks (VPNs) and all last-mile Internet connections, including wireless connectivity.
According to Vickram Crishna of Radiophony, some of the technology claims are exaggerated. One of the key issues here is TCP/IP. This defines how the packets are assembled, at either end of the pipe. Once they are assembled, the pipe is just that, a conduit, and cannot change the packets. One can modify a closed circuit and use some other protocol for the duration of the circuit, but then it won't help transmit packets that originate or terminate outside the closed network any faster (slower, if anything, due to the extra processing). TCP/IP is critical, because that is the protocol governing nearly all data services nowadays, and all of the services running on the open Internet.
Using multiple routers on a network in order to obtain better Internet speeds is not new either, and is no way novel. Simply using multiple routers, each one connected to a different Internet bandwidth supply, will be an effective way to speed up data communication transfer rates between a network and the external Internet. In this case, packets move through the first available router, which is managed by setting the fail rates (i.e. if the packet fails to be handled by the first router it encounters-because that one is busy-then it automatically tries for the next one). It is arguable that one or other proprietary (i.e. patented) system may do this better than some other, but that won't be an overwhelmingly good reason to invest in the patent owner's IPO. As the commentator of OS4OM points out on http://badpatent.blog.com/2010/05/21/fatpipe-networks-india-bad-patent/, there is no way to 'predefine' which router will be used, without modifying packets themselves, which is not feasible.
Such solutions can only benefit very large closed networks running several critical high-bandwidth consuming network applications, provided the gain in throughput justifies the cascading expenses of buying non-standard hardware and running non-standard networking protocols.
In order to bring to light what OS4OM believes are illegitimate patents it has initiated legal challenges to those patents, which they believe were granted without full analysis by the US Patent Office and has begun a public marketing campaign to prevent organizations from attempting to patent other methods and/or technology that are clearly open source and have prior art associated with them. OS4OM believes that Fatpipe Networks India should not have been allowed to patent these methodologies and they will work to have this patent revoked. The patent number is 7,269,143.
According to research report of Hem Securities, the company operates in a highly competitive environment. For the WARP product, there are a few companies that copy and market similar products. The competitors for Xtreme and WARP products are Astrocomm, Xroads Networks, F5 Networks and Radware. The traditional WAN Optimization market segment has competition from Blue Coat, Riverbed and Cisco.
Technological competitive advantage? Not really.— Raj Pradhan
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