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Optical components

Chorum Acknowledges Staff Cuts

RICHARDSON, Texas -- About two weeks ago, components and subsystems maker Chorum Technologies Inc. quietly let go 250 employees, about 31 percent of its staff, in order to cut costs in a choking economy.

"Our product design activity is still going well and research and development has been unabated," says Scott Grout, Chorum's CEO. "But our customers in this space are hurting. This was an action on our part to adjust to that."

Most of the jobs cut were positions related to Chorum's manufacturing operations. Some production efficiencies Chorum has realized over its first full year of commercial producing products also contributed to the layoffs, Grout says.

With this round of layoffs, Chorum's overall headcount has dropped from more than 800 to 561. That's about 17 percent fewer than the 676 folks it employed at the end of last year.

Grout says that all of the cuts were made in its Richardson office and none at Polar Beam, a Chinese raw materials maker Chorum bought earlier this year.

So far this year, Chorum has announced two customers, Nortel Networks Corp. (NYSE/Toronto: NT) and TyCom Ltd. (NYSE: TCM; BSX: TCM), and acquired two firms, Polar Beam and Polytronix (see TyCom Buying Chorum Filters, Chorum Seals Deal With Nortel), and Chorum to Acquire Polytronix). Citing market conditions, the company withdrew its bid for a public offering in March (see Chorum Withdraws IPO).

-- Phil Harvey, Senior Editor, Light Reading http://www.lightreading.com
OpticalValueLine 12/4/2012 | 8:34:32 PM
re: Chorum Acknowledges Staff Cuts This is what everyone has expected. With JDSU,NT all sharply slow down, how can Chorum hold? They pulled out IPO weeks before, they had to. I think they may never have a chance again to go IPO. This is a cold reality for most of the optical players, system or components. We have to face it. If a company can go IPO in 2 years, it most likely would lose its value in less than 2 years. It is a simple economic rule: Easy come easy go.
fk 12/4/2012 | 8:34:31 PM
re: Chorum Acknowledges Staff Cuts I expect we'll see a consolidation in the component space this summer. While I don't expect JDSU to be doing a lot of acquiring, I imagine that some existing companies can add to their portfolios by purchasing some of the promising new technologies that are cropping up with the plethora of component startups. I would expect that the majority of the liquidity events that happen over the near term for component vendors will be of the M&A variety.
whineceller 12/4/2012 | 8:34:31 PM
re: Chorum Acknowledges Staff Cuts Im not an expert on the componant market but Chorum seems to be victim of some bad timing. Along with the public companies many pre-public networking companies are scaling back to conserve money (Im very surprised that there hasnt been more reporting on this) and certainly not tyring to IPO in this market.I dont expect the IPO market to turn positive until the fall or later. And then only for solid companies. Companies with no or limited revenues will have to wait it out hopefully they have the cash reserves to wait it out/ and go back to VCs who will be unwilling to cough up cash except for solid path to profitability products and plans. Its a tough situation that is probably grimmer than reported. Here is my read of the current situation

-Extremely Selective VC $
-Diminished enthusiasm for buyouts from established players except on the cheap and then only for strong players.
-Extremely weak IPO market
-Weak CLEC market-and Selective
-Healty but selective ILEC market still
-Glut in componant and product markets
-Overbuilt Core with limited applications yet to use the existing bandwidth
-Carrier, CLEC and ILEC -trying to make $ with what they have already installed.
If significant improvements in $ return can be gained by new technology then it will probably be adopted. Spells trouble for Vendors who have adopted expensive switched fabrics and prohibative cost to buy into these backplanes especially for CLECs
-all of this will feed into the componant market also so compants that save $ and provide true cost
savings to mfgs and ultimately the market could win.


On the hopeful side
-New broadband access technologies are coming 3G, x and VDSL, Broadband wireless, Broadband Ethernet.Expect these to start in full swing in 2003
-The core has been built out before and then used to the brim.

Im surprised that there hasnt been more reporting of this regarding other companies. I also expect much more problems and layoffs throughout the year and into next as companies burn through cash, face diminished hopes for buyouts from public companies and have limited or no revenue sources.
On the hopeful side I believe there will be major opportunities for companies that have products that provide CLECs, Carriers and ILECs etc true cost savings, streamline thier operations, mesh with existing technologies. Basically better cheaper, and displacing technologies


Hopefully Chorum and other pre-ipo componant and mfgs havent burned through too much $and can come out the other side in tact winners. The comms market is not dead just in a very painful shift. Some displacing technology winners will emerge and make it big and go on to great sucess others....

If Ive depressed you, or if you feel that Im offbase with my analysis,feel you work for a doomed startup and want advice. Or I have missed something Or you wish me to review your business plan please feel free to email me at [email protected]
yr_we_here 12/4/2012 | 8:34:30 PM
re: Chorum Acknowledges Staff Cuts If I were a Chorum employee - I would be writing my resume this very second. If an IPO is postponed, and 30% of the employees are laid off, there is no reason to assume that this process is at an end - it wasn't for the dot coms.

Here's why:

Contingency 1: Chorum IPOs
Sacking such a large percentage of employees is a sign of weakness. The company money from the public and couldn't get it. Now it is evident that Chorum counted on that money, and is far from living off its revenues. Any IPO the company goes into now would be priced extremely low. That would mean less money from the IPO, which in turn means reduced expansion plans. The company is likely to end the slimming process after it knows exactly how much money it is missing. This will inevitably sink its stock - a sinking stock in today's market spells the beginning of the notorious Shakeout. Internet companies that followed this route are too numerous to count. Take any Internet IPO from the past 12 months.

Contingency 2: Chorum fires more people now
Since Chorum is a large company, with 'recognized' revenues and in a hot segment, it is reasonable to assume that it can IPO despite what just happened. Since more people will be fired after the (low-priced) IPO, this will damage the very people who trusted in the stock enough to buy it - as I said, in the Internet market this used to be common practice. However, if Chorum has a decent management that doesn't want to cheat the public out of hard-earned $$, they would need to stabilize the company BEFORE they IPO. How? by firing more people, by another diluting financing round, etc.

I would recommend http://www.lightreading.com/em... :-(
Rugger 12/4/2012 | 8:34:27 PM
re: Chorum Acknowledges Staff Cuts So, is Chorum still considered the third best private company by Light Reading? When will you revise that list? What about the other lists: top ten stocks and top ten movers and shakers?
fk 12/4/2012 | 8:34:26 PM
re: Chorum Acknowledges Staff Cuts I used to want to see our company in the top ten, but given LR's track record, I think it's actually the kiss of death!
Milano 12/4/2012 | 8:34:22 PM
re: Chorum Acknowledges Staff Cuts With widely published sales levels, just do Accounting 101 to realize that Chorum had to do it. Their cash position/burn rate can be derived from their prospectus. On top of it, Tycom is overstock with their Slicers, so no relief there this year.

They are banking the house on MEMs as there profitability window with interleavers is slowling closing.

Bottom line: by Q3 they need to refinance, IPO would dilute too much. Expect more layoffs.

M.
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