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Lucent To Buy Chromatis?

Word has it that Lucent is set to buy metro DWDM startup for $5 billion

May 25, 2000

2 Min Read
Lucent To Buy Chromatis?

Rumors are circulating that Lucent will acquire Chromatis Networks Inc. http://www.chromatis.com, a startup manufacturer of metro DWDM products. Sources say the deal is valued at $5 billion.

“[The deal] certainly makes sense. Chromatis is quickly establishing itself, while a lot of its competitors products have turned out to be vaporware,” says Doug Green, vice president of marketing at optical networking startup Ocular Networks http://www.ocularnetworks.com. Before moving to Ocular, Green was vice president of marketing at Chromatis.

However, while Green says he has “heard about the deal,” he questions whether it’s for real. “I would classify this as being in the rumor stage for now,” he says.

If the deal turns out to be non-existent, it wouldn’t be the first time that Chromatis had been the target of spurious rumormongering. A few months ago, word had it an acquisition was imminent. Nothing happened.

Still, a couple of things lend credence to this round of speculation. First, Chromatis is funded in part by Lucent Venture Partners http://www.lucentventurepartners.com, the VC arm of Lucent. Second, Chromatis’ third round of funding was postponed recently – suggesting that a bid had been made on the company.

Other industry scuttlebutt suggests that two other companies were in the running to buy Chromatis: Nortel Networks http://www.nortelnetworks.com, and Sycamore Networks Inc http://www.sycamorenet.com.

Sycamore reportedly outbid Lucent, offering $5.5 billion. Why would Chromatis turn down the larger offer? Sources cite two possible reasons. First, Lucent has a more extensive distribution network.

The second reason is more scurrilous – not to mention entertaining. Chromatis’ board includes Mory Ejabat, chairman and CEO of Zhone Technologies Inc http://www.zhone.com. Before joining Zhone, Ejabat was president and CEO of Ascend Communications Inc., which was sold to Lucent in 1999 for $24 billion.

Insiders claim that Ejabat and Dan Smith, president of Sycamore (and another Ascend alumnus), "don’t get on." They speculate that Ejabat may have used his influence to nix the deal. Sycamore strenuously denies that there is any bad blood between the two execs.

A spokesperson for Sycamore says that the company had heard that Chromatis was being bought by Lucent, but would not be drawn on whether Sycamore had made its own offer.

Chromatis and Nortel declined to comment. Zhone could not be reached at press time.

-- Stephen Saunders, US Editor, Light Reading http://www.lightreading.com

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