Startup headed by former Siara executive parades $62M in funding and a new manufacturing deal at Supercomm

June 6, 2001

5 Min Read
Movaz Makes a Splash

ATLANTA -- Supercomm 2001 -- If confidence spelled success, the future would be guaranteed for Movaz Networks Inc. Since early March, the spunky startup has managed to capture and cultivate industry attention, even when it has very little to say (see Movaz on the Move).

And at Supercomm 2001 on Tuesday, Movaz had plenty to say: It announced a $62 million round of venture funding, lab trials with Genuity Inc. (Nasdaq: GENU), and an exclusive design and manufacturing deal with Harris Corp. (NYSE: HRS).

The product? An optical networking box that Movaz says enables wavelengths to be intelligently assigned.

In a press conference this afternoon, CEO Bijan Khosravi said all these elements are part of a grand plan to help Movaz draw a winning hand in the emerging market for optical switching.

The funding, for instance, will hold the company until the second quarter of 2002, at which time Movaz will either seek more funding or try to go public, according to Khosravi, who was formerly vice president of marketing at Siara networks, a company that was later purchased by Redback Networks Inc. (Nasdaq: RBAK), where he also contributed in a marketing role. Comprising $52 million in equity and $10 million in debt financing, the round brings Movaz's total funding to $92 million.

The equity round included $20 million from Oak Investment Partners, with contributions from Meritech Capital Partners and Silicon Valley Bank. Menlo Ventures and WorldView Technology Partners also are included as repeat investors. Silicon Valley Bank led the debt round, with input from GATX Ventures.

The money will help fund the rollout of the company's new Ray product line, also officially unveiled here at the show, which Khosravi says has an intriguing value proposition.

"We think the cost of wavelengths is vital to ushering in the new optical era." And to help things along, he says, Movaz will cut present lambda service provisioning costs for carriers from about $75,000 per OC48 wavelength to roughly $35,000 to $45,000 (exclusive of fiber costs).
Manageable optical bandwidth isn't a proposition unique to Movaz. Indeed, it's become a rallying cry for a hoard of leading DWDM (dense wavelength-division multiplexer) vendors and startups (see Optical Taxonomy, page 7}. But Movaz is taking an interesting approach to manufacturing with a series of licensing and manufacturing arrangements.

Take the company's announcement of the Harris deal. This is a 10-year manufacturing and development agreement, in which Harris will assist Movaz in manufacturing the core element of its Ray product line, an optical switch that deploys free-space optics inside the box and MEMS (micro-electro-mechanical systems) to switch individual wavelengths without multiplexing or demultiplexing them first.

Harris has built a range of optical gear for government, aerospace, and medical applications, but it hasn't engaged in any commercial optical networking ventures like Movaz's. Harris will now turn its expertise in free-space optics -- and part of its 375,000-square-foot manufacturing facilities in Palm Bay, Fla. -- over to Movaz.

And the deal is exclusive. "We won't be dealing with other partners in this area," says Michael P. Zeitfuss, VP of technology and strategic development at Harris.

The agreement's similar to one Movaz cut with Goodrich (NYSE: GR) earlier this year (see Movaz on the Move). That deal is also a 10-year exclusive manufacturing arrangement, in which Goodrich will devote its extensive MEMS development and manufacturing resources, previously untapped by optical switching vendors, to Movaz.

Both Harris and Goodrich are older companies in transition, with lots of scientific expertise and no presence in the commercial optical networking sector. By enlisting these relatively unknown sources -- companies that need Movaz as much as Movaz needs them -- Movaz has worked out exclusive, and presumably economical, arrangements that guarantee it unique R&D and manufacturing that won't be shared with other emerging players in the optical switching space. Movaz also has apparently found a way to ensure it can fill carrier orders on time.

On the downside, Harris and Goodrich do not have proven track records with optical networking, so it's not clear just how smooth their transition will be. And, of course, they're manufacturers -- not big carrier customers.

During today's announcement, Khosravi revealed another aspect of its development that could augment its value proposition. Both Harris and Goodrich will work with and add to Movaz's intellectual property, which includes a patent licensed exclusively by Movaz from the University of California at Davis.

The way Khosravi tells it, Movaz filed its own patent for wavelength switching, then discovered UC Davis already held one for the exact same technique. Apparently, Movaz was able to arrange the agreement with the university by proving it had developed the same approach to optical switching.

If all of these rights and manufacturing arrangements don't serve to wow prospective customers, Movaz has another incentive lined up: It's got Genuity participating in its initial development. While nothing's guaranteed, Genuity spokespeople say they're very interested in the emerging switch, have been giving Movaz input on its development, and plan to stay involved with the startup.

With all this endorsement under its belt, Movaz must now live up to the expectations it's setting -- no easy task. "We are confident," Khosravi says. "Everyone tells us we're on the right track."

- Mary Jander, Senior Editor, Light Reading For more information on Supercomm 2001, please visit the Light Reading Supercomm 2001 Site.

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