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Sycamore Prepares to Shut Down

Craig Matsumoto
News Analysis
Craig Matsumoto
10/23/2012
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Sycamore Networks Inc. (Nasdaq: SCMR) is finally calling it quits.

The optical networking company announced Tuesday afternoon that it's going to wind down operations.

Most of Sycamore's assets are being sold to private equity firm Marlin Equity Partners for $18.75 million, a deal expected to close before April. The business includes just about everything Sycamore does, including optical networking. [Ed. note: Marlin Equity is not to be confused with JT Marlin, the firm from the movie Boiler Room in which Vin Diesel plays a stockbroker. Just saying.]

Once that sale is done, Sycamore plans to start liquidation procedures. The Marlin sale and the liquidation are subject to stockholder approval.

Not included in the Marlin sale is IQstream, a traffic optimizer that targets mobile networks. Sycamore is trimming staff associated with IQstream but still hasn't determined if the business will be sold or liquidated.

Sycamore also announced a cash distribution of $2 per share, supplementing the $10 per share announced in September.

Sycamore shares were down 27 cents (4.5%) at $5.71 in early after-hours trading.

Why this matters
"What's to save Sycamore?" Light Reading asked that question as far back as 2002, when it was clear the former high-flier was getting battered by optical networking's post-bubble crash.

At the time, Sycamore had $1 billion in cash. Could it be put to use to revive the company? we wondered.

Apparently not. Although Sycamore has perked up in the last year or so with its software focus, the company never fully revived, subsisting on its installed base for optical cross-connects. In 1999, the days of irrational exuberance, Sycamore had a market capitalization of more than $14 billion without having turned a profit. Its market cap today is $173 million.

As for why all this matters: Light Reading was founded to cover the brave new world of optical networking, with Sycamore high on the list of subjects. Sycamore managed to stick around a lot longer than most, but it never really recovered after the bubble burst.

For more



— Craig Matsumoto, Managing Editor, Light Reading

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paolo.franzoi
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paolo.franzoi,
User Rank: Light Beer
12/5/2012 | 5:18:43 PM
re: Sycamore Prepares to Shut Down


Craig,


 


They should have spent it or given it back a LONG time ago.  I would say the employees (especially management) have done very well at the expense of shareholders.


seven


 

Pete Baldwin
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Pete Baldwin,
User Rank: Light Beer
12/5/2012 | 5:18:43 PM
re: Sycamore Prepares to Shut Down


Should they have made this move years ago?

gtchavan
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50%
gtchavan,
User Rank: Light Beer
12/5/2012 | 5:18:43 PM
re: Sycamore Prepares to Shut Down


Very smart move.  At least they have some cash to distribute to the share holders.  With SDN it can only get worse.

gtchavan
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gtchavan,
User Rank: Light Beer
12/5/2012 | 5:18:42 PM
re: Sycamore Prepares to Shut Down


Telco's better start writing a claim to assets in their contracts if the supplier folds and fails to cover the warrantee and future software upgrade from now on, because more of their suppliers are going to bite the dust especially when SDN kicks in.

paolo.franzoi
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50%
paolo.franzoi,
User Rank: Light Beer
12/5/2012 | 5:18:41 PM
re: Sycamore Prepares to Shut Down


chuckj,


You might be right in general, but Sycamore is a specific case of wasting money and time.


- Went public in the Optical bubble and got a boat load of cash


- Bubble popped, CLECs died and few people bought Sycamore products


- None of the money was spent to make it a real business - nothing was bought, little was designed, it just sat there for almost 10 years


- Now they have distributed a bunch of the money and will end out handing out the rest after getting almost nothing for the actual business.


The actual telecom equipment companies are trying to make new things - whether that is a good idea or not.  Time will tell on that.  I think SDN is going to take a lot longer and have a much smaller impact than you do, but again that is a different debate.


Sycamore is a model of criminal corporate governance.


seven


 

BigBro
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BigBro,
User Rank: Lightning
12/5/2012 | 5:18:24 PM
re: Sycamore Prepares to Shut Down


Am I reading this right: the stock is trading at $5.71, and they've got about twice that in cash, and zero debt, on the books, and not really burning a lot?


Isn't this a no-brainer "buy the stock to get your cut of the cash"? What am I missing?

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