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Calient Raising $150 Million Plus

Light Reading
News Analysis
Light Reading
12/19/2000
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Calient Networks, a California startup that makes all-optical switches based on micro-electro-mechanical systems (MEMS) technology, is several days away from closing on a third round of financing in excess of $150 million.

It's a monster round -- and apparently the initial valuation attached to the term sheet scared some of the investors. After asking for a $1.5 billion pre-money (before investment) valuation, the company settled for a $750 million pre-money valuation, according to several sources familiar with the deal.

Juniper Networks Inc. (Nasdaq: JNPR) will be among those participating in round three. Juniper has invested in earlier rounds of Calient's funding.

MEMS technology, which uses a compact array of tiny mirrors to switch beams of light, is one of several possible approaches to building large, all-optical switches. Calient officials claim its product, expected to enter customer trials in the next few weeks, can pack a complete 1,000-by-1,000-port optical switch into a box the size of a kitchen drawer (see Calient Claims Breakthroughs On Optical Switches).

Other MEMS companies have been acquisition targets. For example, Nortel Networks last spring bought Xros Inc. for $3.2 billion in stock.

Calient officials confirmed details such as the scale of the financing and the participation of Juniper, but they would not divulge the valuation, the exact amount, nor the name any of the other investors involved.

"We're real pleased with the round," said Terry Gibson, Calient's Chief Financial Officer. "It's a great mix of strategic and financial investors."

Gibson said the deal was expected to close this week. In terms of the valuations, he said the decline of the financial markets has lowered the valuations of private optical networking startups in general.

"Stepping back from it, valuation isn't the key issue. We're not immune to the financial markets. At this time, given the financial markets, only the best companies are getting funded at all."

Gibson said the beta version of Client's switch is expected to ship in the next couple of weeks and that the financing will be used to build infrastructure.

"We're raising enough money to complete the Kionix Inc. acquisition and fund operations through 2001," said Gibson.

Calient in November announced it would acquire Kionix, a chip foundry that will aid in the manufacturing of Calient's product (see Calient Secures MEMS Supplies)

-- R. Scott Raynovich, executive editor, Light Reading http://www.lightreading.com

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