Start-up aims to join telephone and wireless calls

By Eric Auchard

SAN FRANCISCO (Reuters) - A secretive start-up backed by two powerful Silicon Valley venture capital firms will on Monday outline its plans for bridging the gulf between mobile telephones and fixed-line phone networks.

Executives of Mountain View, California-based Stoke Inc. say they are developing a way to offer so-called "fixed mobile convergence" inside offices, at home and around town as well -- a major stumbling block the communications industry is facing.

Stoke, which has been operating in "stealth" mode since its founding, joins a dozen start-ups trying to solve the question of how to hook up mobile phone networks to fixed-line phone or cable networks to give phone users a single point of contact.

"There are a lot of dots that need to be connected," Randall James Kruep, Stoke president and CEO, said in an interview.

Led by veterans of some of the hottest makers of network gear in the 1990s -- Bay Networks, StrataCom, Cisco (CSCO.O: Quote, Profile, Research) and Juniper (JNPR.O: Quote, Profile, Research) -- Stoke is backed by venture capital powerhouses Kleiner Perkins Caufield & Byers and Sequoia Capital.

Competitors include U.K.-based Apertio and Norwood Systems, Ireland's Cicero, Israel's Commil, Canada's NewStep, and U.S. start-ups Azaire, Kineto, BridgePort NetMotion, Persona Software, Quorum Systems and Tatara Systems, analysts say.

Stoke's software helps manage incoming calls and determine the most efficient way to route the call onto local networks. A mobile phone call could be connected via a Wi-Fi connection, a cable broadband link or a citywide wireless WiMax network.

"We are keeping hundreds of thousands of balls in the air," Kruep said, tossing up figurative balls as he talks of managing traffic running over different networks in a local vicinity.

Stoke has 75 employees, many of them engineers with experience in signal switching, cellular and Internet network design and computer security. It is creating a secure pipe over any number of different communications technologies for handling voice or data calls.

"There is a lot of debate right now about who will have the right approach," said Craig Mathias, an analyst with Farpoint Group of Ashland, Massachusetts. "Stoke has a very comprehensive architecture," he said of the alphabet soup of emerging technologies Stoke supports, including SIP and IMS.

POLITICS OF NEW NETWORKS

But the blue-chip start-up will need more than veteran executives and well-connected financial backers to succeed in a market analysts say is far from defining common standards.

"That whole area is really problematic until we get standards," said Ken Dulaney, Gartner Inc.'s senior wireless industry analyst. "There are lots of political problems here."

The still ill-defined area of fixed wireless convergence may suffer from the same fragmentation that has delayed the spread of location-based mobile phone services because each carrier has built separate systems, Dulaney argued.

"It is going to take a Herculean marketing effort to realize the vision of fixed mobile convergence."

The bewildering array of services offered by phone, mobile, cable and wireless data operators has led prices to tumble and created mounting pressures on providers to develop hybrid offerings to grab a bigger share of each customer's wallet.

The recent deal by U.S. cable operators to resell Sprint Nextel Corp.'s (S.N: Quote, Profile, Research) mobile phone services under their own brands is one example of the trend. Stoke technology promises to merge the underlying networks of these traditional rivals.

The company had received initial financing of $10 million from Kleiner Perkins and Sequoia Capital.

On Monday it will announce a Series B round of $20 million from Kleiner, Sequoia and new investors Pilot House Ventures LLC, Integral Capital Partners and Presidio Venture Partners.

The new investors could provide Stoke with further connections in the cable industry and in Asia.

Boston-based Pilot House is backed by pioneering U.S. cable network entrepreneur Amos Hostetter. Presidio is an arm of Japanese trading firm Sumitomo Corp. (8053.T: Quote, Profile, Research), which has ties to a Who's Who of the Japanese telecommunications industry.

Kruep said trials with two major equipment operators are underway, one in the United States and one overseas, but he declined to name them. The first commercial contracts are expected to be signed early next year, he said.

South Korea and Japan, the world's most advanced telecommunications nations, are Stoke's initial target markets. Mobile network gear makers in the league of Ericsson (ERICb.ST: Quote, Profile, Research) or Nortel (NT.TO: Quote, Profile, Research) are Stoke's natural partners, analysts say.

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