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Solinet Morphs Into CeybaSolinet Morphs Into Ceyba

The Ottawa startup formerly known as Solinet offers a few more details about its long-haul optical strategy

October 29, 2001

5 Min Read
Solinet Morphs Into Ceyba

A key Ottawa startup has changed its name, rounded out its management team, and lifted the veil a bit on its product strategy. And in doing so, it's solidified its position among three startups that are shaping up to be leaders in next-generation long-haul networking gear.

Solinet Systems today announced that it's changed its name to Ceyba Inc. (see Ceyba Names Its Team). "The ceyba is a Guatemalan tree known for its longevity and emergence above other trees in the forest," says CEO Scott Marshall. He says the change was driven by a series of confusing associations for the old name. For one thing, the company did not want to be associated with Soliton, a specific optical component technology. In addition, the company had discovered a German concern with the same name.

Ceyba's also announced the appointment of four executives to complete its management group. These include John Bournazos (ex-Abatis) as VP of sales and field operations; Jim Ghadbane (ex-Alcatel) as VP of R&D; Benoit Fleury (ex-Nortel) as VP of marketing; and Paulina Yee (ex-Newbridge and Alcatel) as director of finance and administration.

Besides the newcomers and Marshall (see Solinet Gets CEO From Cisco), the team also includes CTO Hanan Anis, who co-founded the company after leaving Nortel last year (see Is Trouble Brewing in Ottawa?), and Richard Pepin, VP of manufacturing and operations, who also came from Nortel.

The company says ex-Nortel engineers and Solinet founders Madhu Krishnaswamy and Avid Lemus remain at the company as principal engineers. And Andy Wright, whose defection from Williams Communications Group (NYSE: WCG) to Ceyba raised eyebrows last year (see Williams Loses Key Staff ), is director of network planning.

Ceyba also claims it's on track with hiring staff. To date, the company has 250 employees, 50 shy of the 300 it originally said it would hire by yearend.

In addition to these moves, Ceyba now openly states its goal of developing long-haul gear that supports 10- and 40-Gbit/s "in one platform." Up to now, the company's been too tight-lipped even to indicate this much.

Ceyba is among a small group of startups that still have sizeable backing in the long-haul optical area. Another is Innovance Networks, also an Ottawa startup, which is working on 40-Gbit/s long-haul gear and recently raised $17 million in debt on top of $75 million scored late last year (see Innovance Scores $75M and Innovance Quietly Raises $17M in Debt). Innovance now acknowledges that it is on the brink of a new strategic investment, although details are unavailable. "We'll have an announcement by the end of the year," says a spokesperson. Rumors of a multimillion-dollar deal first surfaced in the Ottawa papers last month.

The third big long-haul startup is PhotonEx Corp., which is developing 40-Gbit/s gear and has garnered $90 million in funding (see Photonex Scores Huge 3rd Round). Like Ceyba and Innovance, PhotonEx is seeking to replace today's Sonet gear with high-speed optical core transport equipment, competing with Corvis Corp. (Nasdaq: CORV).

Each of these companies says it's offering a "more complete solution" than Corvis. And while none has a product ready to show, analysts say the reference hints at why they've been given so much money.

"They're getting larger rounds in part because they're developing end-to-end solutions, instead of a single switch," says Rick Schafer of CIBC World Markets. As a result, they'll have higher burn rates than firms with one prototype, he notes.

But the startups also are preparing for what could be an extended slowdown in carrier capital spending. "The capex market is uncertain," Schafer notes, and these new companies have gone for more money in order to maintain solid balance sheets through the downturn.

Still, the fact that they've succeeded is significant in itself. They've gained the attention of key backers at a time when VC funding is notoriously tight -- and when established players such as Alcatel SA (NYSE: ALA; Paris: CGEP:PA), Lucent Technologies Inc. (NYSE: LU), and Nortel Networks Corp. are suffering agonizing losses from long-haul sales.

Schafer says it's clear these newcomers have a compelling technological edge and excellent management teams. But behind the scenes, he says, they've also been able to demonstrate to their backers some level of support from carriers that are considered to be among the significant next-generation players, such as Qwest Communications International Corp. (NYSE: Q). While these votes of confidence remain secret, they are nevertheless a prerequisite for large rounds of funding, Schafer asserts.

Schafer says leading carriers are now deploying about 60 percent of their network capacity. At the same time, demand for services is growing at about 50 percent annually, according to the lowest estimates. That means that within a few quarters, a new market for long-haul gear will open up -- just about the time today's long-haul startups are ready to go to market.

There's no coincidence that the new arrivals have appeared just as Alcatel, Lucent, Nortel, and other key long-haul players are hitting their hardest times in the sector. The losses and layoffs these companies have undergone have been the gain of newbies with the nimbleness to forge ahead with plans that appear to have stymied the old guard.

The new startup recruits also are taking their contacts in the carrier marketplace with them as they leave their old jobs. And those contacts include links to a highly influential network of well-connected manufacturers and investors.

It all adds up to a new market, one where a shakeout of startups already has yielded three to watch.

— Mary Jander, Senior Editor, Light Reading

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