Ceyba Corp. has confirmed the company has closed its doors.

Rumors of Ceyba's demise surfaced on Light Reading yesterday (see Headcount: Survey Sez), though signs of trouble had persisted for months (see Ceyba Rattling in Ottawa). Today, CEO Scott Marshall says the remaining 120 employees are going home today.

"Our board was not convinced we could do another round of funding," Marshall says. Ceyba had cash, but one of its VCs pulled out of a planned round for later this year (he won't say which one, though he says he'd like to). There were candidates to replace the defector, but the board thought it too risky.

"There's no new investment in long haul," Marshall says. "Frankly, I think it's a very good time to invest... But the long-haul market is going to be very slow for a long time."

He insists Ceyba was progressing despite the slow market. Two customers had picked the company's products for installation -- one was to get its gear this week. Two more were testing Ceyba's wares in their labs.

Now, unless the company's assets can be sold quickly enough to a bigger player, those deals will fall through.

Ceyba started life as Solinet Systems in 2000 to develop next-generation long-haul gear based on optical technology. By early 2001, Marshall, formerly of a Alcatel SA (NYSE: ALA; Paris: CGEP:PA) and Cisco Systems Inc. (Nasdaq: CSCO), was on board as CEO (see Solinet Gets CEO From Cisco), and the company had scored a monster round (see Solinet Systems Scores $93 Million). Chief investors included Altamira, Alta Partners, Bessemer Venture Partners, New Enterprise Associates (NEA), and WorldView Technology Partners. A name change followed (see Solinet Morphs Into Ceyba).

The Ceyba closing is another sign of the troubles facing the next-gen long-haul networking sector. As the need for long-haul capacity has waned, so have the startups that were the darlings of optical networking funding two years ago.

Ceyba's chief rivals, Innovance Networks, PhotonEx Corp., and Xtera Communications Inc. have reported progress in fits and starts, but their overall prognosis is still uncertain (see What's Cookin' at Core Startups?). At one point recently, Innovance was described as a possible candidate for a big U.S. government RFP win, but it looks as if that hope may have evaporated (see Lehman Spots Gov't RFP Surprises and Corvis Solo in Bake-Off Boast).

Partnerships have been cited as key to the future of any of these companies. Ceyba was reportedly looking into a deep-pocketed parent months back, and Marshall says he's got "a lot of ideas" about who may buy the assets.

Is there a chance Marshall would try to restart the company with a new mission, perhaps as part of a wider-reaching technology startup? "Anything's possible," he says. In the meantime, though, his goal is to "have a couple beers and maybe get some water-skiing in" before heading to a new project. [Health Advisory to Scott: Don't try both at once!]

— Mary Jander, Senior Editor, Light Reading