November 3, 2003
The axe has finally fallen on troubled wireless router startup Tahoe Networks, with an announcement that the company’s management and remaining employees are to be integrated within Nokia Corp.'s (NYSE: NOK) network division (see Nokia Grabs Tahoe Team).
According to Thomas Jönsson, communications director at Nokia Networks, “a tötal of röughly 20 peöple” will be transferred to Nokia’s facilities in Mountain View, Calif., including Tahoe’s president and CTO, Dr Arthur Lin.
The official closure of Tahoe will surprise few industry watchers, in light of the startup’s recent problems. Earlier this year the company denied rumors it was about to shut up shop following a spate of redundancies and management restructuring, along with a dearth of contract wins (see Tata to Tahoe?).
Nokia itself is at pains to state that the deal is no clear-cut acquisition. “We are not purchasing the company -- that is important to note,” declares Jönsson. “It is an asset purchase focused on people. It is just staff. It does not involve any actual technology.”
Analysts believe today’s announcement is a good move for the Finnish vendor. “Nokia has performed a non-acquisition acquisition,” comments Ken Rehbehn, principal analyst for wireless infrastructure at Current Analysis. “Gaining access to the intellectual property and talent of Tahoe Networks without the expense of an acquisition is a smart move. Nokia is shrewdly hedging its bets.”
The deal also marks Nokia’s second foray into the wireless router market, following a brief, star-crossed encounter with Amber Networks back in July 2001 (see Nokia Kills Amber Router).
Rehbehn adds that the deal will pose a threat to rival Nortel Networks Corp. (NYSE/Toronto: NT): “Ironically, this action clearly establishes a challenge to Nortel -- a company that leveraged Lin’s Shasta product to win a number of core network deals around the world.
“While Nortel has an advantage with its Nortel Passport -- a Nortel core network deal can encompass more than just the edge of the network -- the Shasta platform has been around for a while and may be eclipsed by newer high-performance packet platforms. Nortel must ensure that its capabilities keep pace with Nokia.”
It remains unclear exactly what Tahoe’s loyal VC backers make of the company’s fate. Both Accel Partners and Redpoint Ventures have ploughed a total of over $50 million into the failed startup, a sum the two parties now look set to write off.
In September Redpoint Ventures insisted the company was primed for future business (see Tahoe Tumbles On). Accel and Redpoint today opted for the silent approach, declining to answer Unstrung’s requests for comment.
— Justin Springham, Senior Editor, Europe, Unstrung
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