In spite of raising a monster $225 million round of finance last December, Calient Networks Inc. yesterday told 60 of its 269 staff that they'd become redundant, in order to cut costs.

The startup expects the job cuts to give it another four to six months’ grace to get its all-optical switch through carrier trials and get some orders rolling in before it needs to raise further funds.

“Rather than run up to the edge and fall off, we decided to do the prudent thing and make economies now," says Charles Corbalis, Calient’s CEO.

Corbalis concedes that it has taken Calient longer than expected to develop its optical switch because of unforeseen "challenges." Its switch, which can scale to handle more than 1,000 wavelengths, is a particularly compact arrangement of tiny tilting mirrors based on MEMS (micro-electro-mechanical system) technology (see Calient Claims Breakthroughs On Optical Switches). Calient says that “four or five” potential customers and distributors are waiting in the wings to test its switch. But it realizes that this evaluation process is likely to be long–winded. “We’re probably talking nine to twelve months,” says Corbalis.

Amazingly, the $225 million Calient raised six months ago doesn’t represent a big enough “cash buffer” to help Calient over this period, when no revenues will be coming in, according to Corbalis (see Calient Secures $225M 3rd Round).

Developing photonic switches and supporting multiple carrier lab and field trials is incredibly expensive, he says. Part of the reason is that Calient is developing a particularly advanced optical switch, which translates into particularly expensive components (especially when bought in low volumes) and particularly expensive test equipment.

The carrier trials also rack up huge bills. They require teams of highly paid technicians to spend months working off site, clocking up big expense accounts. Each trial can end up costing millions of dollars, according to Scott Clavenna, president of PointEast Research and director of research at Light Reading.

The big question is whether these trials will translate into orders. “Calient has an impressive optical switch, so lots of carriers want to test it,” says Clavenna. “Whether that translates into sales remains to be seen. The core is a very difficult market to crack, particularly with purely photonic solutions."

One of the reasons for this uncertainty is that moving to all-optical switches is a big leap into the unknown -- not something that carriers will undertake lightly (see MEMS Madness).

Another reason is that some carriers have concluded that monster all-optical switches like Calient’s may not be necessary; distributed architecture networks may enable them to get away with lots of smaller switches rather than a few big ones.

On top of that, some vendors argue that carriers have already beefed up their core backbones too much and that there’s no need to boost capacity even further with optical switches at present.

Not surprisingly, Corbalis rejects these comments. “The number of customers beating on our doors --that’s what’s driving us,” he says. Calient's switch will cut service providers' operating costs, he contends, and that's a priority for all carriers.

Calient’s switch also has applications in metro networks, Corbalis notes, citing a joint demonstration of this with Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA) at the recent Supercomm trade show.

— Peter Heywood, Founding Editor, Light Reading
http://www.lightreading.com