Zhone Rezhones (Again)

Zhone Technologies Inc. confirmed on Monday that it has cut about 120 jobs, in an effort to keep its expenses down.

The access equipment startup, which began in 1999 with $500 million in venture capital and leveraged buyout money, says it still hopes to become a public company when the markets allow. Zhone withdrew its registration for an IPO early last year.

"After all of our acquisitions we've had a few redundant positions. We've reduced some expenses in the past – like cutting down on the number of offices we have," says company spokesman Tim Donovan (see Zhone Rezones ). "This round [of layoffs] was done to make our operation lean and to keep us from having to go out and seek another round of funding."

Donovan says the company is close to winning some key carrier contracts in the next few months and has realigned itself internally to improve its chances.

Zhone's product portfolio includes several products for the access portion of telecom networks. Its flagship product, the Broadband Access Node, combines a DSLAM, a switch/router, and a broadband subscriber management system in a single box. In August 2001, it bought Nortel Networks Corp.'s (NYSE/Toronto: NT) AccessNode and Universal Edge 9000 product lines for an undisclosed sum (see Zhone Acquires Nortel's Access Gear).

Donovan says this recent round of layoffs was concentrated on slower-growing areas of Zhone's business, such as its integrated access device and wireless point-to-point products in Oakland, California. Also affected were some former Nortel employees in Atlanta, who had just joined Zhone about six months ago.

Zhone had only eight employees in September 1999. By September 2000, it had about 490, which grew to around 615 employees by April 2001. If this number stayed the same through the rest of 2001, the recent layoffs would represent a 20% cut, reducing Zhone's headcount to fewer than 500 people. Zhone officials would not say what the current headcount is.

Zhone has acquired all or parts of six companies since it was founded by Mory Ejabat and Jeanette Symons. The company was ramping for an IPO in late 2000 but withdrew that filing in May 2001 (see Zhone Zhaps IPO ).

Zhone has made no formal indication of when it intends to take another shot at the public markets. Donovan says this summer might be a good time, as it will coincide with some new product announcements and, he hopes, new customer wins as well.

— Phil Harvey, Senior Editor, Light Reading
http://www.lightreading.com