Ceyba Inc. has been forced to send a third of its workforce packing, but the company's not giving up on its future, though signs are clear it will be an uphill battle.

The next-generation, long-haul startup, once the toast of Ottawa's optical community with a record-breaking $93 million warchest, cut about 34 percent of its staff this week, leaving about 125 workers. While employees throughout the organization were affected, many jobs were cut in R&D, where the startup has most folk assigned.

The layoff is the second in Ceyba's short life, following a cut of 50 from its roster of 250 last July (see Startups Adjust to Long-Haul Reality).

Ceyba spokespeople say the cuts were made to douse cash burn and prepare for more funding. Ceyba plans its next round for the second half of 2003, though it won't disclose amounts or investors involved.

These days, another layoff on its own is hardly news -- hence, Light Reading's weekly Headcount roundup. But Ceyba's one of the leading startups in the long-haul space, along with Innovance Networks, PhotonEx Corp., and Xtera Communications Inc. Its progress -- or regress -- reflects the prospects of the whole market segment.

And prospects seem to have changed little recently. Carriers are still resistant to spending on long-haul networks, where pre-downturn overspeculation led to the current overcapacity (see What's Cookin' at Core Startups?).

Still, Ceyba insists interest hasn't burnt out. Two leading North American carriers have selected Ceyba for their networks, according to CEO Scott Marshall. While there's no prospect of live deployment, given the current capex cutback, he maintains that a range of long-haul routes -- more than 177 by his count -- will need revamping over the next several years.

"Given time, we'll be successful," he asserts.

There are negative and positive industry views on Ceyba's stance. According to Tom Nolle, president of consultancy CIMI Corp., startups like Ceyba face a problem because their products aim to replace existing infrastructure. The keyword is "replace": Carriers aren't biting right now.

Further, Nolle says the startups just aren't providing enough electrical on-ramps and interoperatility for their wares. And they're not addressing the metro space sufficiently, where core buildouts are likely to happen first. "If [the startups like Ceyba] can't get started with what carriers need in the near term, they probably won't live to see them in the long term," Nolle says.

Another analyst takes a more positive view of Ceyba. "I think of all the optical startups, Ceyba's got the best shot to succeed," says Mark Lutkowitz, principal of Telecom Pragmatics Inc., a consultancy. In his view, Ceyba's in better financial shape than its peers, though he admits that's not saying much. What's more, he thinks Ceyba's got a better handle on the needs of carriers, exhibited in its shying away from emphasis on 40-Gbit/s networking. Ceyba's technology, in his view, isn't too futuristic for customers to digest.

Ultimately, Lutkowitz says it may take a key partnership, in the form of an investment and subsequent acquisition, to bring that technology to market successfully. That's a pattern already set by Ciena Corp. (Nasdaq: CIEN) and WaveSmith Networks Inc. (see Ciena Nabs WaveSmith).

Ceyba's Marshall says that's a possibility. The market will have to get a bit better before that can happen, though. "The big guys are so busy trying to clean up their own finances... Someday, when we'd be accretive to them, it might make sense."



— Mary Jander, Senior Editor, Light Reading