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Rochester Top 100: Company's chips used across the Internet

Rochester Business Journal
March 18, 2016

When average users go online they likely are not thinking about Perinton-based Xelic Inc.

But Xelic has thought about them.

The company designs chips that are being used across optical transport networks nearly every time a person goes online.

“When you think about it, in all of these major companies that are using our designs—our designs are all over the world in optical networking,” said Mark Grabosky, a co-founding partner. “When you’re on your computer on the Internet you may be going through one of our designs. We’re helping enable the whole fiber-optic network—there’s a very good chance you are, if you’re using Verizon or AT&T.”

The firm develops intellectual property cores—the central part of a telecommunications network—that are used by some of the largest firms in the world, including Juniper Networks Inc. and Cisco Systems Inc.

The company employs 16 people and plans to add a few staff this year.

The standards-based core provider was founded in 2002 by four partners—Grabosky, Mark Gibson, Doug Bush and David Wurthmann.

To get started, the founders took on consulting projects to fund their vision.

“We didn’t want to take on VC funding because we didn’t want to give up that kind of control of the company,” Bush said. “We wanted to have control over what we did. Over time we’ve evolved into a networking company that’s pretty well-known in the industry.”

The firm develops its own intellectual property cores with its designs found nearly everywhere, the owners said.

When the firm began, the telecommunications industry had lost some footing. As one of the survivors of the 2001 tech bust in the optical transport networking industry, Xelic was able to emerge a leader—prompting growth and credibility for the young firm over time, officials said.

“A lot of people got pushed out of the market, which left a little bit of a vacuum for us,” Grabosky said. “Initially companies would ask us whether or not ‘you’re going to be around and how do you know this is really going to work.’ ”

Added Bush: “The downturn probably helped us.”

The firm is located on Pittsford Victor Road but does nearly all its business nationwide or internationally, with customers in Europe, Asia and South America.

Though the Rochester market is not the firm’s focus, operating here helps diversify the local economy, officials said.

“We bring a unique technology to this area and we employ highly skilled, highly educated engineers,” Grabosky said. “We bring money into the community.”

Its focus has been on ramping up to 400 gigabytes fiber network speed/bandwidth from the last standard of 100 gigabytes. That focus helped drive growth over the past few years. However, it is tough to predict the market’s turns, Wurthmann said.

“Even now there are periods of waiting because it’s very cyclical,” he said. “As a new rate gets introduced there’s a lot of early adopters that jump on to that. They want to get out there, and then it ramps a little bit and then it tapers off, and then when the next break comes you get the early adopters again.”

To handle the cyclical nature of the industry, company leaders take a strategic approach, Grabosky said.

“We operate in the black,” he says. “We have a lot of cash on hand so that we have a buffer because we know that that business is somewhat volatile. Our contracts are major, (but) it’s not like there’s this constant cash flow. You get a big one and then you get nothing.

“We’re very profitable overall so we keep cash on hand so that just in case we have a weak quarter or a weak year it’s not a problem,” he adds.

A predetermined number of products helps keep the company’s resources and goals in reach. Power and bandwidth are customer demands today.

“Power is getting to be more and more of a factor,” Grabosky said. “Applications change too—everybody is doing video conferencing now. … A lot of people work remotely now. There’s a lot of data going across the network; a lot of streaming video like Netflix.

“There’s always a lot of uncertainty in our business because it’s the design cycle. It’s the early part of the design cycle—you start with what we do,” he adds.

The Internet’s universality paired with the rise of smartphones helps Xelic grow. The speed of communication is one thing that will never slow down, Grabosky said.

“People want faster and more data—that never ends,” he says.

The Rochester Top 100 program is presented by the Greater Rochester Chamber of Commerce and KPMG LLP. Launched in 1987, it recognizes the fastest-growing private companies in Greater Rochester. The 2016 Rochester Top 100 event will be held Nov. 2. For more information, go to greaterrochesterchamber.com.

Xelic Inc.
A developer and provider of high-speed optical networking cores
Year founded: 2002
2015 Ranking: 31
Top executives: founding partners Doug Bush, Mark Gibson, Mark Grabosky, David Wurthmann
Current employment: 16
Headquarters: Perinton
Website: xelic.com

3/18/2016 (c) 2016 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email service@rbj.net.


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