Light Reading
DWDM vendor raises another round, plans to cut manufacturing costs and maybe buy a thing or two

Movaz Bags $20M More

Phil Harvey
News Analysis
Phil Harvey
1/26/2006
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Movaz Networks Inc. announced today it has closed $20 million in venture funding, along with a line of credit for $12 million.

The investors in this latest round include Anschutz Investment, Comcast Interactive Capital, Menlo Ventures , Oak Investment Partners , Meritech Capital Partners , and WorldView Technology Partners . Movaz says it has raised $182 million to date.

The round was closed on December 30, and this is the first time Movaz has acknowledged Comcast as an investor and customer, an item Light Reading reported in 2004. (See Sources: Comcast Has Movaz Stake.)

Movaz says it raised the new funds to help it grow from a "50 to 60 million dollar a year company to a $100 million dollar company," according to CEO Bijan Khosravi. He says that scaling the company will help it reduce costs in manufacturing and will boost its customer support.

Carriers are still buying lots of DWDM gear, Khosravi says, but they're looking toward using ROADMs very soon. He says in the last three months Movaz has seen most carrier networking decisions allowing for ROADMs.

That will benefit a company like Movaz, but it's facing tough competition from Asian equipment makers, which can sell just about anything in a network at a lower cost than their U.S.-based counterparts.

"Price is still the top priority of carriers, so the Chinese do make it challenging," says Heavy Reading chief analyst Scott Clavenna. "Outside the U.S., Huawei and ZTE are everywhere and making it tough on traditional DWDM suppliers."

Khosravi says he's not ready to say what Movaz has decided to do to cut its manufacturing costs: "But we have to think about other countries and outsourcing because we have to reduce the costs."

Competitive cost pressure is one thing. Another is that the price of ROADMs has just been generally too high in past years, a factor that has stunted the technology's adoption. (See ROADMs Roll On and ROADM Overview.)

Meanwhile, Movaz is also benefiting from a general need for DWDM applications in all sorts of networks -- cable, municipal, telecom, enterprise, and federal. Khosravi says about 15 to 16 percent of Movaz's revenues come via its OEM partners, Lucent Technologies Inc. (NYSE: LU) and Motorola Inc. (NYSE: MOT).

In the cable space, Movaz says it has five network wins altogether, including Comcast Corp. (Nasdaq: CMCSA, CMCSK). The company lays claim to 15 enterprise network customers, including some educational institutions and research networks. But telecom carriers make up most of Movaz's 90 customers and the more than 4,000 nodes it claims to have in service.

So does the new money mean Movaz will soon be looking for an exit?

"Everyday it is on my mind how to scale the company more," says Khosravi.

To reach its immediate goal of becoming a $100-plus million company, Movaz may even consider a small acquisition. "To get there, we have to broaden our portfolio, and maybe a quick way to get there is to buy someone. We are discussing all of those strategies."

— Phil Harvey, News Editor, Light Reading

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