Green Gooses AFC

AFC founder says the company isn't doing enough with its cash

May 14, 2003

4 Min Read
Green Gooses AFC

PETALUMA, Calif. -- Advanced Fibre Communications Inc. (AFC) (Nasdaq: AFCI) founder Donald Green is still retired. He's retired three times during his career, but this time, it seems, he really means it. During a recent Light Reading interview, Green didn't even hand out business cards because, as he put it, he's no longer "in business."

Still, Green has a substantial amount of influence in the area of Sonoma County known as Telecom Valley, in respect to both business and philanthropy. And he's got some sharp words for his startups and for AFC, where he remains a significant shareholder.

"They've done very well in a market that's been hostile," Green says. "They've been helped by having a billion dollars in cash. That was a little farewell gift from me to the company," he adds, displaying a facial expression that was well within spittin' distance of a grin.

Some context on Green's remark: In 1999, Green encouraged AFC to invest $5.5 million in Cerent Corp. After Cisco Systems Inc.'s (Nasdaq: CSCO) purchase of Cerent, Green urged AFC to collar the Cisco shares that AFC received at about $69 per share to lock in the gains on the investment. Finally, AFC sold 10.6 million Cisco shares in the first quarter of this year for around $690 million in cash.

Now back to the succulent quotes...

"I worry that [AFC] sits on the money and doesn't do enough with it," Green says. "Now I'm not suggesting that they go nuts, but there's got to be some opportunities to make that money work a little more."

Dear goodness. Is the Don of Telecom Valley suggesting the managers at AFC are sitting on their duffs and not being aggressive enough? Well, kinda...

"In the abstract, managers are hired to get a 30 percent return on the assets deployed. They can't just take a chunk of it to one side and get five percent on it. That's not what they get paid to do."

Back at AFC, there were grins all around when Green's comments were relayed to the marketing team by a panting reporter. "Well, sure, that's easy to say now that he's gone," chuckles Corey Geiger, AFC's VP of product management, marketing, and customer service.

In addition to AFC, Green also started Optilink Corp. (which was acquired by DSC Communications, now Alcatel) and Digital Telephone Systems, where he held the CEO chair for 17 years. Since his tenure at Optilink began in 1986, most of the telecom startups in Sonoma County can be traced back to Green or one of his former employees. He now operates a venture fund with his son and serves on the boards of several companies, including Network Photonics, CoSine Communications Inc. (Nasdaq: COSN), Cierra Photonics Inc., and Turin Networks Inc.

One of Green's most endearing qualities (to reporters, anyway) is his ability to answer questions directly with little, if any, spin. During a wide-ranging chat, the highlights of which will be published at a later date, Green opined on several of his portfolio companies.

"CoSine needs an inflection in the market," he says. "And there's some evidence that an inflection could occur for network-based services, so I think it would be premature for CoSine to sell out, at least in the near term.

"Some shareholders are making noises and saying they'd like to see liquidation or the company sold [see Mellon Pressures CoSine for Sale]. But when you look and discover that they're relatively new investors, you have the suspicion that they're just looking for an opportunity to flip some stock and make some money."

Green also showed Turin, where he has a 5 percent stake, some tough love, saying the firm is "obviously struggling to get the sales ramp that it needs to justify the investment that's been made. I won't say the board is entirely happy, but they understand the situation and they like what's in the pipeline in terms of business."

Though Turin made a tidy deal with Motorola Inc. (NYSE: MOT) a year ago, Green says much is still to come from that relationship (see Motorola Deal Plugs In Turin). "Motorola has to get its people trained and skilled at selling the product. So far they've had little or no impact on revenues but...they have signed up for a distribution that could be quite significant."

And now, with a grain of salt...

When asked whether he would be attending Supercomm 2003, Green nearly smiles again and says: "I usually go just to remind myself that I don't know what's going on anymore. I stand in front of a booth and think, 'I know they make something to do with the telecom networks, but nothing here tells me what it is.' "— Phil Harvey, Senior Editor, Light Reading

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