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Boston Area Startups Slash Jobs

As evidence that things are getting more and more dire for startups trying to conserve cash in the slowdown, Ellacoya Networks Inc. and Quantum Bridge Communications Inc. each announced a second round of layoffs this morning.

The startup layoff story has become a familiar one these days. Companies once flying high on the hopes of lucrative public offerings are now finding themselves scrambling to close third and fourth rounds of funding with wary venture capitalists. And as customers become harder and harder to find, companies are being forced to sacrifice jobs to cut burn rates.

Ellacoya's layoffs began in May, when the company laid off 50 people, 20 percent of its 250 employees (see Telecom Woes Prompt More Layoffs). Today it announced that it would be cutting another 35 jobs from its roster, bringing its current head count down to about 105, says Matt Burke, a company spokesperson.

“We didn’t think we’d have to do it again,” he says. “It’s a really tough thing to do. It makes me sick to my stomach to think about, but from a business standpoint our board of directors and executive team did what they had to do.”

Ron Sege, the company’s CEO was unavailable for comment, as he was handling issues related to the layoffs, says Burke.

Cuts were made across the entire company, but Burke says that the bulk of jobs were lost in administration. He also says that the company tried to spare as many engineering spots as possible, even though it has completed development of its carrier-class IP services platform, the SGS 44000.

The job cuts were directly related to the company’s ongoing fundraising efforts, according to Burke. Investors in the current round demanded that the company cut its burn rate significantly as a condition for the next round of funding. And reducing head count was one of the most immediate ways to address that issue, he says.

This seems to add up, given Ellacoya’s current product situation. While the company claims to have shipped its flagship product to at least six trial customers, it has not realized revenue on any of these deployments. And with its last round of funding closing back in December of last year, the company should be in need of more cash (see Ellacoya Gets a Blue-Chip Backer). In total, the company had raised over $84 million. Back then, it was pegged as a hot IPO prospect with backing from big names like Goldman Sachs & Co. If and when the company closes this next round of funding, it should have enough cash to get it through another year, says Burke.

“With the current head count, this should sustain us until 2003,” he says. “Raising money is a lot different now. You have to make sure to keep the burn rate down, and we have to meet certain milestones in 2002.”

Ellacoya wasn’t the only New England startup to announce job cuts this morning. One of its neighbors in the metropolitan Boston area, Quantum Bridge, also announced its second round of layoffs. While the company confirmed that there was a workforce reduction, it refused to give details on the number of employees who had been cut -- even declining to specify the current headcount. But sources say that the company has laid off as much as 40 percent of its staff.

"We did have a reduction here today," says Charlie Guyer, oddly uncommunicative director of corporate communications. "But that is all I can really say. We are still doing good things with customers, and we expect to have some good news out about new customers soon."

Quantum Bridge had already laid off a smaller number of employees earlier in the year, says Guyer. But he surprisingly declined to give additional details.

“We’re going through the same thing as everyone else in the industry right now,” he says. “One of the biggest costs is salaries. It’s a matter of being smart in an uncertain economic climate.”

Quantum Bridge, a developer of passive optical networking technology, also had its eye on a big IPO. The company had raised more than $124 million of venture money from big backers like New Enterprise Associates (NEA), Morgan Stanley Dean Witter & Co., and Dain Rauscher Wessels.

It had even filed an S-1 with the Securities and Exchange Commission last year (see Quantum Bridge Aims for IPO). But as the Nasdaq plunged to new lows last spring, the company finally pulled its filing in May (see Quantum Bridge Withdraws IPO). Its executives said the company would refile when the market conditions improved. But so far that hasn’t happened.

Unlike Ellacoya, Quantum Bridge says it is shipping and collecting revenue from six customers, only three of which have been communicated: Comcast Corp. (Nasdaq: CMCSA, CMCSK), a cable operator; Advanced TelCom Group Inc., a California-based competitive local exchange carrier (CLEC); and Sigecom LLC, a utility company (see Quantum Bridge Wins Over Utility). It also claims to have trials going on with several other customers.

— Marguerite Reardon, Senior Editor, Light Reading
http://www.lightreading.com
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sinorat 12/4/2012 | 7:25:43 PM
re: Boston Area Startups Slash Jobs And what a fine bunch of chiefs too!
Hey fellas, the company needs some more rented plants. How about some more of those really nice high-back red leather chairs? By the way, I know where you can get some rather nice Mr.Q Urinal Cakes really cheap. There MUST be some more grunts to fire. So, you can afford it. (A-R-R-O-G-A-N-T!!!) What about a truffle hunt after the company pollo outing? What, no lobster this year? Gee that IS too bad.
QB Motto :"even when you aint got it, flaunt it"
Bloody multi-starred, old-nun-slapping-you-in-the-gob ARROGANT!!!!!!

Oh, by the way chaps, the world isn't laughing WITH you! Perhaps you can make pretty Christmas Novilties with all those rolls of fibre?
rotag 12/4/2012 | 7:26:07 PM
re: Boston Area Startups Slash Jobs it's one thing to lay people off and conserve expenditures, it's quite another to lay people off without touching a single director. In a company that's bloated with management.

All chiefs.

my $0.02.
sinorat 12/4/2012 | 7:26:36 PM
re: Boston Area Startups Slash Jobs Free art. Who gives a ****.

As for prospects for future success, if QB does have good stuff (and they REALLY DO, and remember that the cast-aways help to make it so) then the next step is to SELL SOME. Perhaps some of the company's credibility went with the cast-aways. Maybe, the artsy-fartsy decor tells a story of ARROGANCE to prospective buyers. Humility is an asset when your company has few customers, few prospects, a small name, and a questionable (yet is may well come) market. If you build it they MAY NOT come. (And stop blaming Wall Street and the bad economy. Waa Waa I WANT MY MOMMY.) LOOK ACCROSS THE STREET AT THE STEAMING HULK THAT ONCE WAS PICTURETEL. (And they actually sold stuff! Go figure. And when did they start? During the BAD BAD days in the early 90'.)

As for the cast aways, I always thought that only Moe, Larry, and Curly threw away the nut and ate the shells. Damn, you learn something new every day.
tet109 12/4/2012 | 7:26:40 PM
re: Boston Area Startups Slash Jobs Your right Quantum Bridge does have product that work well. From all PON vendor that I research Quantum Bridge have the only product that work in real network. My company maybe deploy PON in 2002 probably and Quantum Bridge can do it.

-Tet
Wired 12/4/2012 | 7:26:42 PM
re: Boston Area Startups Slash Jobs Quantum Bridge does have nice art in the building. But the bad news, for those that like to put others down, it is all produced by employees. Can you believe it. Not only do they have products that work they have art that the company did not have to pay for. Free art. Or were the dinner meals payment.
nlogan 12/4/2012 | 7:26:44 PM
re: Boston Area Startups Slash Jobs It is reassuring to see that so many ex-QB'ers share the same sentiment regarding the incestual practices of the management team. Regarding the art in the lobby - it points out another ugly aspect of QB's downhill slide: The rediculously expensive and excessive tech drive building with it's millions of dollars in architecture, glass railings and unused lab gear.

I wouldn't be suprised to see $150,000 brand new optical scopes up on eBay sometime soon.

"NIB! NEVER OPENED TEKTRONIX SCOPE! NO RESERVE!"

Seller: "AZona" Maybe he needs another story on the poolhouse.
rotag 12/4/2012 | 7:27:30 PM
re: Boston Area Startups Slash Jobs Nope.

Nice to see the artwork is still in the lobby..;-)
pond 12/4/2012 | 7:27:30 PM
re: Boston Area Startups Slash Jobs poor Ted. So bitter.
Vegas in the Valley 12/4/2012 | 7:27:31 PM
re: Boston Area Startups Slash Jobs Good insights, Ted.
sinorat 12/4/2012 | 7:27:36 PM
re: Boston Area Startups Slash Jobs I have friends, good friends. However, if I had hired them, and they were NOT doing the job, they would still be my friends. I'd help to find them employment elsewhere. (None of MY friends are yes-men leaches.) Business is business. A start up is in business TO MAKE MONEY for its shareholders. It is NOT in business to provide a country club for the friends of the senior staff. Period. Loose sight of the money and you're in trouble.

Define good friends. Are these the favorite RUMP SWABS of senior staff? Are these the ones who refuse to recognize that the emperor has no clothes, and to tell him so for his own good? Are these the people who "work" until 6:00 to recieve a free dinner, only to pack it off home at 6:10? What friends!!! C-L-A-S-S-Y.

Friends, in such an enterprise, are those who selflessly work all hours to reach the (money) goal. Friends are those who sweat and toil with little thanks. Most of THOSE people have been RIFfed by QB by now. (Oh it is a ponderous chain that YOU have forged Ebenezer...) Remember, some of these people have more equity (in sweat and blood) than do any of the dingle berrys that cling to "the boys" at QB.

Merry Christmas. (Oh by the way, the bag of cash, is it locked up in a Mr. Q ice sculpture destined for the company Christmas party? Oh, no party? Gee how the smug have fallen.)
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