Andreas von Bechtolsheim invented Sun's first product, a desktop workstation. He will now be chairman at Arista Networks.
MENLO PARK, Calif. ― Andreas von Bechtolsheim, a brilliant billionaire who has created some of the best-selling computer systems in the industry, is resigning as chief architect of Sun Microsystems to focus on a start-up that is challenging another industry giant, Cisco Systems.
Jayshree Ullal was recruited to be Arista's chief executive.
Mr. Bechtolsheim's new company, Arista Networks, has built an ultra-fast network switch that costs one-tenth the price of similar products from Cisco. The hardware, which has already been purchased in small quantities by government labs, universities and Internet start-ups, is aimed squarely at data-oriented organizations like Google that need to wring as much speed as possible from their computing centers.
While a number of companies sell competing gear, the pedigree of Arista's management and its modular, easy-to-update software have given the four-year-old firm instant credibility in Silicon Valley.
Mr. Bechtolsheim, who will serve as chairman and chief development officer of Arista, co-founded Sun and invented its first product, a high-powered desktop computer known as a workstation. He went on to start two other companies before returning to Sun four years ago and overhauling its product line.
Arista ― known as Arastra until it changed its name this week ― is expected to announce on Thursday that it has recruited Jayshree Ullal as chief executive. Ms. Ullal left Cisco in May after leading the company's $10 billion corporate switch business. In addition, the company will name a Stanford University professor, David R. Cheriton, as its chief scientist. Mr. Bechtolsheim and Mr. Cheriton are the sole investors in Arista, and they are known in Silicon Valley as men with a golden touch.
In 1996, Cisco acquired a company they started, Granite Systems, for $220 million, and they helped Cisco turn the technology into top-selling products. They formed another start-up, Kealia, to make computer servers, and sold that company to Sun in 2004. Mr. Bechtolsheim remained with Sun and worked on some of its switching products while developing Arista as a side project.
Mr. Bechtolsheim and Mr. Cheriton were also early investors in Google and VMware and became billionaires when those companies turned into big successes.
With Arista, the pair sought to develop products that took advantage of some of the sophisticated software concepts Mr. Cheriton has explored as an academic. They decided to focus on switches that shuttle Internet traffic using the 10 Gigabit Ethernet standard, which is many times faster than the Gigabit Ethernet standard that dominates data centers today.
Switches are the most common hardware used to funnel information between computing systems in a network. The key to Arista's switches is the structure of the software that manages them.
A typical switch from Cisco is rich in features, but has up to 20 million lines of software code and may run on relatively slow processors. Arista breaks all of the major and minor tasks into their own modules that can be updated individually and uses more powerful chips to run it all.
Mr. Bechtolsheim said the design would let Arista make quick changes to products ― even while they were running ― and would also open an interface for customers to more easily add their own features.
"My iPhone runs better software than a typical switch," Mr. Bechtolsheim said. "It is just mind-boggling that the cheapest consumer product has more robust software than what the Internet runs on."
In addition, Arista packages its equipment in compact cases that allow more connections at a much cheaper price than Cisco's bulkier machines.
Lean staffing also helps Arista keep its costs down. The Menlo Park, Calif., company has fewer than 50 employees and started shipping systems a few months ago even though it had no formal chief executive.
"One mistake a lot of start-ups make with the encouragement of venture capitalists is to hire the whole management team upfront," said Mr. Bechtolsheim. "You have a lot of people twiddling their thumbs and spending money."
The knocks on Cisco's expensive gear are nothing new. "Cisco doesn't price based on cost," said Joe Skorupa, an analyst at Gartner, a research firm. "They price based on a willingness to pay."
In Cisco's defense, Inbar Lasser-Raab, a marketing director at the company, said that Cisco had been working on this technology since 2003 and believed it could "provide great value" for customers.
Established switch makers like Juniper Networks and Force10 Networks, along with start-ups like Woven Systems, have also charged after the 10 Gigabit Ethernet market for years. Mr. Bechtolsheim said these companies' products were too expensive or too early in the market.
Arista argues that its products are well positioned to provide fast connections to laboratories with large numbers of servers or companies with heavy Web traffic. Ms. Ullal said she expected the market for 10 Gigabit Ethernet switches, less than $1 billion today, to grow to as much as $5 billion within three years.
Despite higher costs, Cisco remains a dominant force in networking because of its solid reputation. Few companies will risk what amounts to the central nervous system of their networks to an unproven player.
But Arista said that labs and Web-centric companies that did custom work would try something new. Early customers include Lawrence Livermore National Laboratory, Northwestern University and start-ups like BitGravity, an online video delivery company. "In cases where someone comes to market with something compelling, we're willing to take the risk," said Perry Wu, BitGravity's chief executive.
If it is successful, Arista would be a prime acquisition target for Cisco or another hardware player like Hewlett-Packard, which has bulked up its networking business.
Ms. Ullal and Mr. Bechtolsheim said that was not their goal. "If Andy wanted to sell this company to someone else, he didn't need me," Ms. Ullal said. "We are here to build a company." Mr. Bechtolsheim added that he was willing to finance the venture through to an initial public offering.
Mr. Bechtolsheim's departure will certainly be a big blow to Sun, which is wrestling with declining sales and profits and a plunging stock price. But he said he would retain a part-time advisory role at the company.
"It's my baby," Mr. Bechtolsheim said. "I will always be associated with Sun."
