Is TeraConnect Wrecked?

Down to just one full-time employee, the parallel optics company is scanning for markets beyond telecom

August 13, 2003

3 Min Read
Is TeraConnect Wrecked?

They aren't using the word "hibernation," but parallel optics vendor TeraConnect Inc. is doing something close, having laid off all but one full-time employee.

The one-man show is John Langevin, vice president of marketing, who's become caretaker to the company's remaining cash and intellectual property. His job is to scout for new markets, possibly collect royalties on patents, and wait for the time to "relaunch or somehow refocus the business," he says.

It's not as if Langevin is working from home in a bathrobe. TeraConnect did vacate its Nashua, N.H., headquarters, but the company sees enough activity to maintain a small office in Concord, Mass., which Langevin shares with part-time legal and financial help. And he still attends customer meetings and board meetings.

"We weren't ready to work out of a closet yet," Langevin says.

Langevin stresses that TeraConnect has not shut down, despite appearances. Its original phone number is disconnected, and its Website -- which vanished for a while -- is trimmed to one page.

TeraConnect -- like fellow New Hampshire firm Xanoptix Inc. -- was developing "2D" arrays of Vertical Cavity Surface Emitting Lasers (VCSELs), packing 48 or even 72 of them into one module (see TeraConnect Ships 120 Gbit/s Modules and Xanoptix Lands Cash, Launches Product). But earlier this year, TeraConnect's board decided no near-term revenues were coming and opted to slim down.

It's hard not to view the strategy as hibernation -- preserving cash while waiting out the downturn (see Bear Market Inspires Hibernation). Many companies have gone this route, working on the assumption that they've got the goods to succeed and are stymied only by an uncooperative market. Once the economy improves, so the theory goes, the company can pick up where it left off.

But hibernation has its problems (just ask Ted Williams, whose cryonically frozen head has cracked in 10 places, according to this week's Sports Illustrated). By the time the startup revives, its product could be replaced by something cheaper and simpler. Moreover, a startup out of action risks missing potential business (see Supercomm Shocker).

Unlike some hibernating firms, TeraConnect hasn't terminated its marketing. In addition to maintaining contact with customers, Langevin is seeking new avenues for TeraConnect's 16 patents, most of which involve hybrid integration -- the combining of disparate semiconductor parts into a single package.

During the bubble, the technology was celebrated as a way to combine electrical and optical functions into one device, but the concept has other potential applications, such as optical chip-to-chip interconnect. Xanoptix, which has similar technology, is hoping to sell hybrid integration as a foundry service for semiconductor firms (see Xanoptix Hatches Hybrid Strategy).

Other TeraConnect patents related to VCSELs and optical detectors could apply to components for CD-ROM and DVD drives, Langevin says.

Langevin won't specify how much cash TeraConnect has, other than to say its enough "to keep this thing running for another year-and-a-half."

TeraConnect was spun out of Lockheed Sanders Inc. in 2000, with $40 million in funding from Goldman Sachs & Co., Kodiak Venture Partners, and Spectrum Equity Investors (see Lockheed Spins Off Transmitter Startup). Xanoptix was founded around the same time, reportedly by investors who'd been shut out of the TeraConnect deal (see Xanoptix's Strange Story).

At its peak, TeraConnect employed 35.

— Craig Matsumoto, Senior Editor, Light Reading

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