IronBridge Over Troubled Water

Paul Lazay, president and chief executive officer of IronBridge Networks Inc., quit yesterday, the company confirmed this afternoon. Steve Bielagus, senior vice president of engineering and operations, is taking over as CEO, the terabit router startup says.

This is the second blow in a short space of time for IronBridge. The company admits that it’s now having trouble finding a lead investor for its $100 million fourth round of financing.

“Our lead investor pulled out three or four weeks ago,” says Doug Antaya, VP of marketing for IronBridge. “So we’re looking for someone else to take the lead. We’ve got a few folks who have expressed interest, and we’re doing due-diligence on them.”

Antaya says that the investor, which he wouldn’t name, cited concern over the recent stock market downturn as its reason for bailing out.

Last month, Alcatel SA (NYSE: ALA: Paris: CGEP:PA), another investor in the company through its acquisition of Newbridge, indicated that it also was not interested in going another round (see Ironbridge: Showing Some Rust?).

Observers think that all this bad news will inevitably take its toll on IronBridge.

“They’re going to fold like an origami chicken,” says one poetic VC source, who requested anonymity.

Light Reading’s email inbox -- and message boards -- have been filling up with similar messages of doom and gloom about IronBridge all week. Example:

“Word has it that they are on life support and have 2 weeks to clean up their act in order to get some capital relief from VCs. Otherwise, they will be going out of business with a bang in 2001."

The irony is that IronBridge has what could be a hot product. It’s one of only a handful of companies that can implement a potentially highly profitable new application called router wholesaleing, which allows service providers to quickly and easily resell capacity to each other (see Allegro Holds a House Party ).

IronBridge spokespeople deny that the company's in any danger of having to shut up shop. “We’ve got money in the bank,” says Antaya. “And our current investors are pleased with our progress, and they’ve indicated that they will continue to fund us.”

Antaya also claims that IronBridge is getting ready to deploy a product into a third beta site, and that its products should be shipping for revenue in the second quarter 2001.

He accuses a competitor of starting the rumor that the company is on life support, although he declines to say which one he thinks is responsible.

-- Stephen Saunders, US editor, and Marguerite Reardon, senior editor, Light Reading http://www.lightreading.com