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CEO shifts have sent rumors flying, but the company says it's still on track for an IPO
December 13, 2000
A recent game of CEO musical chairs at Zaffire Inc. has triggered Silicon Valley gossip that the DWDM startup is looking to be sold.
The rumors were fueled by the recent announcement that the company had hired Jim Fultz, former executive vice president and chief sales and marketing officer for Antec Corp. (Nasdaq: ANTC), as CEO.
Fultz denies the rumors. “Typically we don’t comment on rumors. But we are definitely not shopping ourselves around."
Fultz says his company has been contacted by potential buyers but describes approaches as "largely unsolicited... I’ve been here five weeks and have already gotten at least five calls from investment banks asking me about taking us public.”
Fultz is CEO number three for Zaffire in just six months. Near Margalit, founder of the company, was the first. Then former Nortel exec, Tony Lavia, was brought in. Four months later, Lavia was ousted and Margalit was back in. As previously reported in Light Reading, Lavia and Margalit disagreed over the company’s vision (see Zaffire Keeps It in the Family ).
“I know there can be some innuendo drawn from our history,” says Margalit, who now goes by the official title of chairman and CTO, “but the decision to bring Jim into the company was mine. I was the guy who interviewed him. It wasn’t driven by the board. We needed an experienced leader to take the company to the next level.”
Margalit says that Fultz was hand-picked for the job based on his leadership at Antec, where Fultz says he grew the sales at the fiber-optic broadband transport technologies vendor from $700 million to $1.1 billion in a little over a year.
While Zaffire previously had set an IPO target for Q1 2001, it has now extended that projection to the first half of next year. But the company emphasizes that the reason for pushing back an IPO has more to do with the current market conditions than with any perceived problems with the company.
Unlike many other metro startups, Zaffire claims that it is shipping to customers: ten to be exact, of which half are already producing revenue. BroadBand Office Inc. (which also happens to be an investor) is the only one Zaffire has announced. But Telseon, an IP data provider, says it is testing the vendor’s equipment and expects to finish trials sometime this spring.
And despite rumors that the company had trouble recruiting top-level engineers a few months back, Zaffire execs say that it has grown its staff right on plan, with the roster now totaling 288, 170 of them engineers. They also contend the company has only about a 2 percent attrition rate.
“I had heard rumors back in the summer,” says Greg Arnold, whose recruitment firm Arnold & Associates has been retained by Zaffire. “There were some concerns about what was happening with the previous CEO [Lavia], but we did some due diligence and their recruitment numbers checked out. Believe me, if we didn’t think they were healthy, we wouldn’t have taken them on as a client.”
But with so many startups vying for the same dollar, it may be hard to keep up the momentum, say some analysts.
“There is a lot of consolidation talk going on,” says Mark Lutkowitz, VP of optical networking for Communications Industry Researchers Inc. (CIR). “Over the next three to 12 months a lot of companies will be combining and partnering. But if they don’t partner or get acquired, there is a higher likelihood that they will fail.”
Margalit agrees that the industry will consolidate. “There are way too many companies in the metro area right now,” he says. “If you look at the whole market there will be a shakeout. But we are in a much less crowded segment.”
-- Marguerite Reardon, senior editor, Light Reading, http://www.lightreading.com
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