Fast-Chip Inc. is the latest casualty of the network processor market, as the company has laid off most of its employees and is putting its assets up for sale.

The company had undergone recent layoffs that halved headcount, to roughly 30, and has now trimmed staff to "about a dozen" to make the final arrangements, according to CEO Gregg Cook.

"We're just cataloguing everything at this point, getting it in a display format for potential buyers," Cook says.

There's also a hope that any buyer would consider picking up the remaining employees as well, since they hold the brains behind the intellectual property. "The first preference is always to sell the company as intact as possible."

Fast-Chip was shipping parts for revenue -- "prototype quantities, but it was for revenue," says Cook. But the company needed more cash to stay afloat while ramping the second generation of its PolicyEdge chip.

Cook says investors repeatedly asked about the outlook for Fast-Chip's customers' customers -- the carriers that would use the equipment that would use Fast-Chip's parts. Given the uncertainty of the carrier market, venture capitalists weren't willing to place more bets on the startup.

During its short life, Fast-Chip changed personalities as often as David Bowie. The company's early focus was on classification, the step that involves looking up IP addresses and other data in large tables (see Fast-Chip Unveils Fast Coprocessor). Fast-Chip had created a memory architecture that was more compact and more intelligent than the content-addressable memory (CAM) normally used for this function (see 10-Gig Processors Shape Up).

But PolicyEdge could also edit a packet header, which meant it could function as a network processor, flagging packet headers to indicate the destination port and any quality-of-service information. So, Fast-Chip shifted gears, touting PolicyEdge as a 10-Gbit/s network processor as well as a handy classification device (see Third-Time Lucky for Fast-Chip?).

In the end, neither tactic could bolster the company during lean times. "They found themselves with a niche product in a tiny market," says Bob Wheeler, analyst with consultancy The Linley Group.

Part of the problem was the variety of network processors available, many of which could handle functions PolicyEdge couldn't, Wheeler says. And on the classifier side, PolicyEdge held only 16,000 table entries on chip, compared with hundreds of thousands available on a content addressable memory (CAM) chip. The second-generation PolicyEdge was to be accompanied by an expansion chip allowing 4 million table entries.

Fast-Chip's exit would mark the second network processor to fall in recent weeks. Last month, IBM Corp. (NYSE: IBM) chose to abandon its network processor, the PowerNP, according to reports from The Linley Group. IBM will stay in the game, however, by selling network processors based on the company's PowerPC chips.

Should Fast-Chip depart, plenty of competitors remain in the race to produce 10-Gbit/s network processors. Agere Systems (NYSE: AGR/A), Applied Micro Circuits Corp. (Nasdaq: AMCC), Intel Corp. (Nasdaq: INTC), and Motorola Inc. (NYSE: MOT) are the large public companies in the race, alongside startups such as Bay Microsystems Inc., EZchip Technologies, Internet Machines Corp., and Xelerated AB.

— Craig Matsumoto, Senior Editor, Light Reading