Core router startup Chiaro Networks Inc. has split off its Israel facility, creating a spinoff to concentrate on the company's optical technology.

The transfer happened a few months ago, as Chiaro's Jerusalem team formed Al Cielo Ltd., a startup offering Chiaro's optical phased array (OPA) technology to the military industry and to applications such as scanners.

Chiaro's business revolves around Enstara, an IP core router. But the company started in 1997 as a components play, developing all-optical switching elements. Investors at the time convinced Chiaro executives to get more ambitious, packing the OPA into a system that became Enstara.

Chiaro's development since then has focused on the router, leaving the optical team languishing.

"We realized we had 16 or 17 PhDs and a fair amount of good engineers over there that weren't being utilized," says Carey Parker, Chiaro vice president of marketing.

So, with investor encouragement, the team of roughly 25, including Chiaro founder Eyal Shekel, was spun off into Al Cielo -- no relation, by the way, to Cielo Communications, the startup whose parallel optics technology was acquired by Optical Communication Products Inc. (OCPI) (Nasdaq: OCPI) many moons ago (see OCPI Acquires Cielo).

Al Cielo has already vacated from Chiaro's Jerusalem office. Oddly, though, the Al Cielo and Chiaro Websites continue to list the old, incorrect address, and a Light Reading call revealed the Jerusalem office still has a Chiaro voicemail tree in place, although no voicemail boxes appear to be active.

Trying a random extension at the Jerusalem office, Light Reading managed to reach a human being -- but not a Chiaro or Al Cielo employee. It was the office’s new tenant, who said Chiaro had moved out in March. [Ed. note: "Al Cielo" means "to the sky" in both Italian and Spanish -- according to Babelfish, anyway -- so maybe it's appropriate that they flew the coop.]

Parker deferred any questions about the move to Shekel, but Israel's weekend had begun by then, leaving Shekel unreachable at press time.

Al Cielo did raise a round of seed funding, but Parker wouldn't disclose the amount or the investors, again deferring to the head office. One report in the Israeli press pegs the seed amount at $1 million.

Chiaro's roots were in Jerusalem, but its main base has been Dallas. Ninety of the company's 125 employees were located there as of December.

Chiaro is rumored to be shedding employees, but Parker says that's not so; in particular, he denies a rumor that a chunk of the software team has left. Exactly two departures have come from that group, he maintains: one who wanted to manage a group larger than Chiaro could provide and another who got a chance to join Microsoft Corp. (Nasdaq: MSFT).

Chiaro's Enstara has been a longshot in the core router race, outlasting several startup rivals but making nary a dent in the franchises of {dirlink 2|19} or {dirlink 12|20}, or even perennial third-placer Avici Systems Inc. (Nasdaq: AVCI; Frankfurt: BVC7). Having raised more than $210 million since 2000, Chiaro continues to wrangle with the years-long process of trying to land contracts with Tier 1 carriers; meanwhile, it's picked up wins here and there, mostly with research outfits (see Chiaro Seeks Its Footing and CERN Selects Chiaro).

Chiaro's biggest break so far has been a partnership with ECI Telecom Ltd. (Nasdaq: ECIL), a setup that landed Chiaro a win at European carrier {dirlink 5|200} (see Chiaro Lands ECI Investment, ECI Lines Up Acquisitions, and Chiaro Scores in Tiscali's Core). Chiaro's sales force has been moved into ECI proper, Parker says, where they're cross-pollinating with reps from recently acquired edge router play Laurel Networks (see ECI to Buy Laurel for $88M).

— Craig Matsumoto, Senior Editor, and Ray Le Maistre, International News Editor, Light Reading