Tellabs, White Rock Getting Cozier
According to one source, a joint product development deal may be in the works whereby Tellabs would take an equity stake in White Rock. So far, though, nothing's been signed, as the companies hash out the details.
How did things get so cozy? Let's review a bit of history.
Tellabs and White Rock have worked together for several years. Their first fling came at the NFOEC conference in July 2001, where Tellabs hooked its 6100 optical transport system to White Rock's VLX2010 OC48 Sonet add/drop multiplexers for a technology demonstration.
Legend has it that sometime later that summer, Tellabs had discussed acquiring the startup for in excess of $300 million. Both companies deny that an offer was made, but neither would say how far along the talks progressed.
What is clear, however, is that a $300 million kitty in mid 2001 would have been a nice score for White Rock. The company's valuation, according to one White Rock insider, dropped to about $100 million after its Series C round, which was announced in November 2001. The company had carried a $125 million valuation after it raised a $30 million Series B round sometime in 2000.
Before its Series C round was raised, White Rock hadn't yet shipped product to a paying customer. In fact, the company is said to have lost a possible order at Allegiance Telecom Inc. (Nasdaq: ALGX) in early December 2001 because its VLX2010 system wasn't ready yet. White Rock's staff was already smarting then, insiders say, because the company had announced just weeks earlier that it would be cutting salaries by 10 percent beginning on December 17, 2001.
Tellabs announced it was buying Ocular Networks for $355 million in cash and options in November 2001, but that buy didn't interfere with White Rock. While Ocular gave Tellabs VT grooming capabilities, White Rock was still needed to do DS3 and OC-n traffic aggregation onto an OC48 or OC192 backbone. Thus, Tellabs became White Rock's first paying customer.
All this history points to White Rock's January 2002 announcement of an OEM agreement with Tellabs, which could not have come at a better time. That agreement enabled White Rock's VLX2010 OC48 (2.5 Mbit/s) and VLX2020 OC192 (10 Gbit/s) Sonet add/drop multiplexers (ADMs) to be bundled with the Tellabs 6100 dense wavelength-division multiplexing (DWDM) system and its 6500 optical transport switch (see Tellabs Takes a New Tack).
The two companies talked about Tellabs making an investment in White Rock during the months leading up to the OEM agreement, sources say. An investment was not made at the time, but Tellabs did spend between $1 million and $2 million to help integrate the two companies' products.
White Rock declined to comment for this piece.
"For competitive reasons, we don't discuss our future business plans," says a Tellabs spokeswoman.
Gone Fishing There's no telling where the Tellabs and White Rock relationship will end up, but its clear that the Tellabs OEM agreement was a pivotal moment for the startup. It's also clear that having other vendor partners has helped White Rock tremendously. Case in point: White Rock is also nurturing a relationship with Mahi Networks Inc. (see Mahi and White Rock: Just Good Friends).
According to Chris Rust, Mahi's CEO, Mahi and White Rock are selling together at three carrier accounts so far. "We really like their (VLX)2020," says Rust.
He says there's nothing exclusive between the two companies, adding that Mahi's emphasis is on pairing up with whichever metro products fits the needs of a particular customer.
Last year, Light Reading reported that Qwest Communications International Inc. (NYSE: Q) was considering using Mahi's access switch, which is designed to aggregate Sonet and Gigabit Ethernet within a metropolitan area's largest points of presence. What Mahi's switch lacked was the ability to aggregate T3 interfaces, which White Rock can do using its VLX2020 OC48 box with a DS3 tributary, the report said.
"We're just two small companies that are looking to satisfy specific customer needs in the hopes of moving some metal," Rust says.
That, in a nutshell, summarizes the hustle and bustle of today's startup market. The small guys are looking for partners that can carry them through the thin years. White Rock may have found one.
— Phil Harvey, Senior Editor, Light Reading