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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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broadbandboy 12/4/2012 | 7:38:11 PM
re: Boston Area Startups Slash Jobs _"It seems like the Gotham and Wavesmith products are essentially the same. And looks like they are going after the same customers."

They may be after same customers, but I don't think they are the same. Based on what I have read, WSN looks like ATM edge switch, smaller than most. Gotham has different design- network processors do the heavy lifting.

"And how do their products compare to ALA's 7670 which today is basically a similar sized ATM edge switch(future mpls/ip capabilities) scalable to ~250 gig for the core;"

I hear that ALA's 7670 is big core switch, not edge. RouteThis knows more than I do, maybe he/she can fill us in?

BBboy
topicoptic 12/4/2012 | 7:38:09 PM
re: Boston Area Startups Slash Jobs you heard, you heard, you heard, you heard wrong as an ex-QBer all three numbers are wrong
lucender 12/4/2012 | 7:38:09 PM
re: Boston Area Startups Slash Jobs > you heard, you heard, you heard, you heard wrong as an ex-QBer all three numbers are wrong

The 90 laid off number is what I heard from a "friend of a friend" who is there, the rest of the numbers were based on the LR article's speculation of 40%.
broadbandboy 12/4/2012 | 7:38:06 PM
re: Boston Area Startups Slash Jobs router_manus: "Wavesmith looks like a small edge ATM switch. I dont understand why any carrier would go to a startup to buy a small ATM switch, which probably doesnt have even advanced ATM features like PNNI, ATM/FR interworking and softPVCs etc."

Question: How do you know they don't have those things now? Maybe they will at later time?

I can understand carriers not wanting to buy from startups, but I can understand wanting to buy new switch with much higher density and less power, and maybe better software than the old stuff they have now.

I don't of know any big vendors bringing out new rack'em and stack'em edge ATM switches like WSN. Must be nice not to have lot of competition.

BBboy
router_manus 12/4/2012 | 7:38:06 PM
re: Boston Area Startups Slash Jobs Wavesmith looks like a small edge ATM switch. I dont understand why any carrier would go to a startup to buy a small ATM switch, which probably doesnt have even advanced ATM features like PNNI, ATM/FR interworking and softPVCs etc. There are already lot of established companies like Marconi and Alcatel which have a pretty stable ATM products.
Dont know how real Gotham is. On paper they do look pretty impressive.
triacs 12/4/2012 | 7:38:01 PM
re: Boston Area Startups Slash Jobs What about the chances for some of the companies in Sonuses space like:
Convergent
Taqua
Telica
Unisphere
seen_the_light 12/4/2012 | 7:38:00 PM
re: Boston Area Startups Slash Jobs >Author: opticaluser Number: 2
>Subject: Re: What about the rest?
>Date: 11/2/2001 10:58:10 AM

>1. Crescent - No way
>2. Astral Point - Very slim
>3. Ellacoya - No way
>4. Quarry - No way
>5. Appian - No way
>6. Coriolis - Possible
>7. Equipe - Slim
>8. Quantum Bridge - slim
>9. Tenor - No way
>10. Gotham - gone

I love these posts that just put up targets and throw obviously biased and unjustified darts are startups.

Tenor - No way? Given the surprising existance of an MPLS based core, if they stay alive through the "down turn" (which is panning out to be more of a "spiraling 180") they'd do quite well.

Also, a legend would be nice. Is Possible better than Slim? I'm guessing it is since Coriolis seems to have customers, didn't overhire and act from what I hear, congealed a nice team atmosphere.
_____ 12/4/2012 | 7:37:59 PM
re: Boston Area Startups Slash Jobs Triacs:

I would not count Unisphere in- I don't think the Castle (voice) group is giving anyone a run for the money; not today and not tomorrow. Not sure about the others.
_____ 12/4/2012 | 7:37:59 PM
re: Boston Area Startups Slash Jobs Topicoptic, AKA "Fancy Pants" why don't you just go right ahead and tell us since you are in "The Know"

What the heck is the big secret behind keeping the number from the GP? You egg on the readers and soon you'll get egg on your face.
lu-alum 12/4/2012 | 7:37:58 PM
re: Boston Area Startups Slash Jobs "Wavesmith looks like a small edge ATM switch. I dont understand why any carrier would go to a startup to buy a small ATM switch, which probably doesnt have even advanced ATM features like PNNI, ATM/FR interworking and softPVCs etc"

I think you have them confused with ASC or someone like that WSN makes some pretty big claims about their those features you mentioned.
<<   <   Page 2 / 25   >   >>
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