After more than seven years in business and more than $183 million in funding raised, it's lights out at Luminous Networks Inc.
Light Reading has learned from several Lumnious staff members that the company handed out final paychecks yesterday [Ed. note: Like, happy holidays, you guys!] and is making plans to try and sell its intellectual property.
Employees that spoke with Light Reading on the condition of anonymity are glad something decisive has happened to Luminous, but they're angry at the company's board and management for not taking advantage of chances to sell the company earlier in its history.
"I'm glad there's some closure, but beyond that, there's not much nice to say," says one employee. "We had second-tier VCs and that's what happens when you deal with dumb money."
The company's CEO, Chris Stark, didn't immediately return calls seeking comment. Employees say Stark, a Dallas resident and former Alcatel (NYSE: ALA; Paris: CGEP:PA) executive, commuted back and forth to the company's Cupertino, Calif. headquarters and was not on hand yesterday when the employees got the news.
A complete shutdown seems odd for a company that just talked up being funded a few weeks ago. But what happened, sources say, is that Luminous failed to meet certain revenue goals specified by its debt holder, Hercules Technology Growth Capital , as a condition of getting at a large chunk of the funding it was expecting.
Hercules announced in October that it had provided Luminous with $7.5 million in debt financing during the quarter that ended September 30, 2005. Representatives from Hercules had no comment on Luminous when contacted by Light Reading on Tuesday afternoon. The company is also an investor in Ikanos Communications Inc. (Nasdaq: IKAN) and Occam Networks Inc. (OTC: OCNW)
In its earliest days, Luminous was one of the pioneers in the resilient packet ring (RPR) space as a creator of metro core platforms designed to give Sonet-like features and protection to Ethernet-based rings. (See Luminous Networks.) In recent months, the company had joined several of its competitors in the Ethernet transport space in a race to provide features for VOIP and video applications at the network's edge. (See Luminous Thinks Small.) In between, it received support from the likes of Ciena Corp. (Nasdaq: CIEN), but that vendor didn't ante-up for the most recent Luminous round, sources say. (See Ciena Links Up With Luminous.)
When Scientific-Atlanta sold itself to Cisco Systems Inc. (Nasdaq: CSCO), a Luminous competitor, the company's executives began to furiously look for an exit strategy, employees report. (See Cisco to Acquire Scientific-Atlanta.)
>> The problem is that they may do it elsewhere....
Also VC's are starting web 2.0 companies ... I know a previous telecom failure startup executive has conned VC's again in starting a web 2.0 company. I am really amazed at these executives capabilities to move from one startup to another startup and keep getting fat salaries ( > 200K).
Once the VC clean up the house, allowing the dead co. to die completely, they may start new companies. The problem is that they may do it elsewhere....
The choice to have Chris as the second CEO is quit interesting and reveals what happens when ego, greed and power are combined.
The previous CEO was leaving and a new CEO search was launched. Quite an impressive set of candiates walked in and they all decided to leave Luminous alone. The fact of the matter was that the previous CEO had told the board to sell and shelf the compnay and the board was not ready. He felt that anyone coming after him to prove him wrong and do a better job than him would ruin his reputation. He infomred the board that he would do his best as a parting gesture to get the right guy on board.
So, he did his best to disuade the good candidates by revealing all the skeletons in the closet all at once and give them a frightful picture of the place. They all walked away.
Finally, the excutive search firm, who were incentivized to hire the CEO, guessed the game well and dusted off an old resume that they had put away to avoid a loss to their reputation. When Chris walked in. The older guy new he had the fall guy who would be a perfect follow on.
Chris: Desperately out of work for more than a year, publically acknowledged as a failure at a large and succesfull optical company then, generally clueless of managing people and business, and finally culturally abrasive to the valley style.
The old guy had found the perfect successor.
The old guy walked away with his very fat cash bonus for his last accomplishment in glee. His legacy was secure. Today, he smiles and tells the story of "I told you so..." with a smirk.
Finally, the new guy realized that he had taken a hot seat and one with a ticking noise under it. He quickly lined his pockets, called out a few old unemployed buddies and told them of the open cookie jar. He did Luminous in.
>> It seems that most of these "CEO"s simply hop from startup to startup never having to produce a product.
A great SCAM in silly con valley....
CEOs just need to keep their VC buddies pleased.
The best response is to shun startups like plague ... in other words it should be extremely difficult for startups to hire people (good as well as bad)
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