Appian Communications Inc., a tenacious five-year-old metro optical networking startup that almost pulled through at the last minute, is closing its doors today, say sources close to the company.

Today, eyewitnesses said, boxes were being carted out of the company's headquarters after it came within a whisker of landing a $12 million funding round as it closed in on a deal with France Telecom SA (NYSE: FTE) -- and then lost it all at the last minute.

Just a week ago, the company had a party in its Acton, Mass., headquarters, to celebrate the coming infusion of capital, sources say.

Then things went into reverse about as fast as a Howard Dean political campaign. At the last minute, the contract with France Telecom fell through, and then apparently the venture capitalists who were prepared to deliver Appian the twelve mil got cold feet. As of today, boxes were being packed, the creamer in the kitchen was being thrown out, and the desks cleared, say two sources working in the same building where Appian was located.

Light Reading was not able to confirm the news with company officials, but at least three anonymous sources said the story checked out. There was no answer at the corporate switchboard, and messages left for Appian Communications executives and investors were not returned.

Earlier today, in the U.K., Mark Weeks, Appian's VP of EMEA, denied that the company was closing. "I'm the European VP, and I would know if it was," he told Light Reading. [Ed. note: Yeeaaaaaaagh!]

Appian had recently keyed on the potential France Telecom deal by marketing its Resilient Packet Ring Technology features, which France Telecom wanted. Appian’s box supports RPR, but so do many others (Incumbents Grab RPR Mantle). It’s not exactly clear who else is in the running for the deal, but Alcatel SA (NYSE: ALA; Paris: CGEP:PA) is a big supplier to France Telecom and has recently been beefing up its packet ring story through a partnership with Native Networks Ltd. Atrica Inc. also lays claim to trials at the carrier.

Appian came from the startup boom of 1999 and 2000, when a whole truckload of other startups looking to market a multiservice provisioning platform (MSPP) that combined the transport capabilities of Sonet (Synchronous Optical NETwork) and SDH (Synchronous Digital Hierarchy) with the data services features of Ethernet, Asynchronous Transfer Mode (ATM), and Frame Relay.

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To give Appian credit, it got much further than a lot of startups in the space. For a while it had some promising business in Asia, including a deal with Japanese carrier NTT Communications Corp. (see Appian Scores Deal With NTT). It also dabbled in the MSO space (see MSOs Eye Triple-Play Gear). But the number of small deals it had struck were apparently not enough to support the company, and in late 2002 it trimmed down to a bare-bones staff to squeeze the most out of its remaining capital (see Headcount: Workplace Weirdness).

Appian raised more than $80 million in capital over its lifetime. Early lead investors who sank big change into the startup included Matrix Partners, North Bridge Venture Partners, and Venrock Associates.

Coming just after the demise of Coriolis networks (see Coriolis Shuts Down), Appian's shutdown shows that the shakeout in the once-hot MSPP space is accelerating. Some competitors that remain in the game include Turin Networks Inc. and Native.

— R. Scott Raynovich, US Editor, Light Reading