Cratos Networks has closed its doors for good, say sources familiar with the company. After searching for more funding for over a year, the company finally came up dry. The last of its 50 or so employees were let go Tuesday, May 28th.
At the last minute, the company was close to closing a deal with a public optical networking company that would have ensured its survival; several sources say that company was Tellium Inc. (Nasdaq: TELM). According to one source, the deal would have provided about $1.5 million per month over the next four months to complete development of Cratos’s next-generation Sonet switch. If at the end of that time the project were completed, Cratos would have been purchased for a predetermined price. Previous equity in the company would likely have been wiped out.
Neither Cratos executives nor its venture capital backer, Comstellar Technologies Inc., returned calls by press time. Tellium declined to comment on this story. Emails sent to public relations contacts at Cratos bounced back.
While Tellium certainly could have benefited from Cratos’s technology, the fact that the startup had not yet completed the product could have been what killed the deal.
“I don’t think that anybody is willing to buy a company and fund its development right now,” says one Wall Street analyst, who asked not to be named. “They are looking for startups with traction in big carrier networks. And that means having a completed product.”
Even having a product ready doesn’t guarantee that a suitor will pull the trigger on an acquisition or that the company will get more funding. Take BrightLink Networks Inc., for example. Its switches were supposedly trialing in two interexchange carrier networks, and the company was rumored to be in talks with Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA), but it was still unable to sell itself or nail down enough funding to stay alive (see BrightLink to Shut Down This Week). BrightLink finally shut its doors for good in April of this year.
Cratos has been in turmoil for over a year now (see Coup at Cratos). Back in May 2001, Sanjeev Newarikar, the company’s founder and CEO, left the company. Rumors floated around that he had been asked to step down and was escorted out of the building. Since then, former employees say the company has been struggling to raise additional funding.
“Comstellar provided enough money to keep us alive but
not enough to sustain a reasonable development schedule,” says one former employee in an email to Light Reading. “Although, if we had received funding and the project was already complete, I have the sneaking suspicion that we'd be in the same boat as [other companies with a product and no customers].”
I recall how early in his career, SN, called work to say he could not drive into work that day. He could not get in his car because the battery in his key fob was dead. It had to be pointed out to him that it was possible to enter his car by using the key in the door lock instead.
DrFager, I agree that the fall of Cratos can't entirely be blamed on SN. Cratos had plenty of time and money to get back on their feet. However, don't underestimate the lingering effects of SN. It's like a traumatic event that causes long lasting nightmares. However, like Mike Tyson, his big paydays are over, I think he took his final fall. -ex
You missed the point. Do you wonder why no-one who knows Sanjeev has any thing positive to say about him? The answer is that he had this unique ability to piss off just about everyone with his vain and idiotic me-the-greatest behavior. I have never seen any body more full of air than that guy. All he did was fool nice comsteller guys who tried their best to help him succeed.
Each of you might have a basis for your adverse comments about Sanjeev Newarikar because of your past experiences with him. But to continue blame Sanjeeev for the fall of Cratos appear to be more personal then an understanding of what forces caused Cratos to shutdown. Long after the exit of Sanjeev, Cratos engineering development team had succeeded in developing a concept test model (CTM) that could have become a product that potentially would rival the products of Cratos nearest competitors (Mahi and Polaris) in the metro-optical space.
However the work of this engineering team was severely hampered continually by an incompetent senior management team which was put in place after Sanjeev’s exit. Also if Sanjeev was so bad and the investors recognized him as such, why didn’t they bring in someone better after they let him go? No they didn’t do that, what they did do was put more money into the company (nearly 3 times the amount initially given to Sanjeev) and hired someone whose management skills in telecom product development was equally as bad or worse than Sanjeev.
Finally, back2basics, ex-telephony guy, and grounded each of you need to get over Sanjeev. He is not worth the emotional capital you are expending on him. Cratos is history and Sanjeev should be a distant memory in each of your minds. Also, he is not the first and will not be last failed CEO. For a quick reference of recent failures at the top, take a look at the former CEOs of Xerox, Kodak, Lucent, and Apple Computer. Sanjeev Newarikar’s tenure at Cratos would be pale in comparison to their respective CEO reigns.
I posted this on the Mahi article responses but figured is applies here also.
It amazes me that so many here seem to enjoy news about companies not doing well and then seem jealous when the news is positive. First you laugh at dot com and now optical. I personally hope no more companies close down. I've talked to many people in the past two years many of whom would sit back and laugh when the company next door would shut down just to find themselves in the same boat a month later. Yes many of the Mahi guys may not make good money off their options at this point but does that really matter? I know so many who wish they could work for half of what those guys are making having been out of work now for months and not being able to pay mortgages. This is a survival market at this point. The amazing thing is that many of those who post here are out of a job and laugh at those working. Go Figure. Those are also the same people who when it comes down to it would join the very same companies they laugh at if the felt they can make a paycheck. Unless of course every poster on here is an Ex- Cerent guy and doesn't have to work. I doubt it. Those guys are still employed and probably too busy to spend so much time on here.
hmmm. Maybe if all the marketing people at all these startups didn't spend all day on here posting, these companies would do a little better.
I'm sure this is like beating a dead horse, but the fact is that SN did not contribute in ANY way to the Cerent or Siara products. If anything, he slowed down progress while starting internal conflicts and accusing others of stealing his ideas. I feel bad for anyone who believed anything that SN said, and I wish all the Cratos folks the best of luck. I agree with the previous poster ... check out the background of the management team from as many sources as possible. Anyone who would have asked me would NEVER, NEVER, NEVER join a SN company. I'd tell you stories that would send chills up your spine.
This company was disaster in the making. I interviewed in early 2001 and Sanjeev their, CEO, said to me "we're building a whole bunch of god boxes". Needless to say, I walked out of there in a hurry. A typical case of an incomponent CEO who claimed he created the CERENT architecture (which I confirmed was bogus). I feel bad for those who remained. The morale of the story is always check out the real truth of reputations of mgmt and what they REALLY achieved.
As they say in consumer marketing 101 "buyer beware"
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