In a bonanza fueled by the economic dynamism of the high-tech industry, the employees and local-area investors of Packet Engines Inc. received $175 million when Packet was sold recently, founder Bernard Daines says.


In addition to the stock options that Packets employees had earned, local-area investors had sunk just $5 million to $6 million into the Spokane-based companyand the entire amount that had been invested in Packet by the time of the sale was just $25 million, Daines says. Thus, the total buyout price of $325 million, paid by Paris-based Alcatel in December just two years after Packet set up operations here, brought the kind of lofty return that only meteoric high-tech start-ups seem to earn.


This time, though, the gusher was struck in Spokane.


Every employee who had been in the company had (stock) options, Daines says. Most of the employees here are participating in the rewards of the buyout in terms of a home upgrade or a paying off of their mortgage.


Nancy Goodspeed, who signed on as Packets spokeswoman not long after the company launched operations here, says, I did well enough that I pinch myself every morning to make sure Im awake.


In the buyout, Alcatel bought out the stock options of Packets employees, with most Packet employees taking cash rather than Alcatel stock, Daines says. The buyout allowed Goodspeed to leave Packet recently and move to a new job in her native Montana so she could be near her aging father.


Meanwhile, theres still more to come at Packet. Daines says the manufacturer has found a site here for its much-anticipated new building, although he declines to say where the site is until an agreement has been signed for the sale.


Also, Alcatel wants so badly for Packet to maintain its momentum in superfast computer networking technology that it has put $20 million in incentive money on the table for Packets employees to earn over the next year or so by staying out front in networking technology, Daines says. He says Alcatel sees Packets technology as an important piece of technology in their basket.


Alcatel wants Packet to growand possibly double in sizein the next couple of years, Daines says. If that happens, Packet would employ a total of 400 people here, up from 200 now, he says.


Meanwhile, observers are hoping that Packets success will spawn other successful ventures hereand bolster economic development in the Spokane area.


If you look at what it takes for a community to grow, one of the elements is a seed that is planted when a company like Packet take root and grows, says Tom Simpson, president of Northwest Venture Associates, a Spokane venture-capital company that invested in Packet.


The success of a technology start-up like Packet can result in the launching of similar cutting-edge ventures that spark even more growth in a community, Simpson says. Look at some of the talent that was recruited to Seattle and some of the other entities that were started there because Microsoft hit it big.


He adds, Packet Engines is attracting a lot of talented people to Spokane. We need to make sure that if they choose to do something else, they choose to do it in Spokane. We need to make sure that theres enough culture and higher education to keep them here. We need to make sure that we dont tax them unfairly, and that the roads are in good shape, and that Spokane is seen as a good place to live. Thats the easier part of the equationto keep them here. The seed that is planted is the harder part. Weve got that part done now.


Daines, a native son of the Spokane area who achieved success in technological start-ups elsewhere before he started Packet, says, I would imagine that there would be other start-ups here. The senior engineering folks who were here (at Packet) for awhile picked up in the neighborhood of three-quarters of a million dollars apiece when Alcatel cashed out their stock options. Thats not enough to launch a start-up, but that doesnt say they cant go off and get an investor, Daines says.


Simpson declines to divulge the return that Northwest Venture Associates earned from its investment in Packet. I will say that were very, very pleased with our investment in Packet Engines, Simpson says. It hit on all of the things that were interested inincluding a nice return and for Northwest Venture to invest in ways that help foster economic development here, he says. He adds, Id love to find another Packet Engines right here in Spokane.


Packets own future as a part of Alcatel can benefit the Spokane area greatly, Simpson says. Packet is a dynamic company. Its a leader in technology with high gross margins. It offers high-paying, good jobs. Its backed by a company that has the capital to facilitate its growth.


Daines view of the future of Alcatel and Packet includes big changes in communications.


The whole communications industry is turning on its ear, Daines says. The volume of data (carried on global communications networks) is very close to surpassing the worldwide volume of voice. The communications industry will become completely data driven, with voice hanging on the side, instead of the other way around.


Thats a big change in an industry with deep roots in the telephone business. Says Daines, The notion of a long-distance communications network, or a wide-area network, will become obsolete, and well have a global LAN, or local-area network, before long.


The term local-area network long has been used to describe a network of computers in an office, but Daines suggests that it could apply to the entire globeand hes also suggested to Alcatel that it can become the global LAN company. Worldwide, in terms of telephone switching, Alcatel is bigger than Lucent or anybody else you could name, he says.


The degree to which Packet succeeds as a part of Alcatel, will be based somewhat on the creativity of the retention package Packet offers to its employees, Daines says. Goodspeed says that before she left Packet, Daines was concentrating on employee retention. I know that was the No. 1 thing on Bernards agenda, she says. People are going to ask themselves, If Im cashed out of all of my options, what are my incentives to stay?


Just 12 of Packets 200 workers have left the company so far following the sale, Daines says. He adds that the challenge in retaining staff members and in attracting more top-notch talent to the Spokane area will have to be met differently now that Packet is a part of a larger company.


In addition to the $20 million technology-incentive program that Alcatel already has approved, Packet likely will have a stock-option program as part of its package, although the program will have to be designed so it isnt inequitable to Alcatels 180,000 other employees worldwide, Daines says.


Daines will stay on as the companys chief executive officer. He says that he and Packets vice president of engineering and director of product management all have signed employment agreements with Alcatel. He declines to divulge the period those agreements cover, but confirms that they include non-compete provisions that could be triggered in certain circumstances.


Its too early to say whether hell be involved in another high-tech venture here, Daines says. I have an obligation to make this succeed, he says of Packets new life as a part of Alcatel.