Cratos Craters

Cratos Networks has closed its doors for good, say sources familiar with the company. After searching for more funding for over a year, the company finally came up dry. The last of its 50 or so employees were let go Tuesday, May 28th.

At the last minute, the company was close to closing a deal with a public optical networking company that would have ensured its survival; several sources say that company was Tellium Inc. (Nasdaq: TELM). According to one source, the deal would have provided about $1.5 million per month over the next four months to complete development of Cratos’s next-generation Sonet switch. If at the end of that time the project were completed, Cratos would have been purchased for a predetermined price. Previous equity in the company would likely have been wiped out.

Neither Cratos executives nor its venture capital backer, Comstellar Technologies Inc., returned calls by press time. Tellium declined to comment on this story. Emails sent to public relations contacts at Cratos bounced back.

While Tellium certainly could have benefited from Cratos’s technology, the fact that the startup had not yet completed the product could have been what killed the deal.

“I don’t think that anybody is willing to buy a company and fund its development right now,” says one Wall Street analyst, who asked not to be named. “They are looking for startups with traction in big carrier networks. And that means having a completed product.”

Even having a product ready doesn’t guarantee that a suitor will pull the trigger on an acquisition or that the company will get more funding. Take BrightLink Networks Inc., for example. Its switches were supposedly trialing in two interexchange carrier networks, and the company was rumored to be in talks with Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA), but it was still unable to sell itself or nail down enough funding to stay alive (see BrightLink to Shut Down This Week). BrightLink finally shut its doors for good in April of this year.

Cratos has been in turmoil for over a year now (see Coup at Cratos). Back in May 2001, Sanjeev Newarikar, the company’s founder and CEO, left the company. Rumors floated around that he had been asked to step down and was escorted out of the building. Since then, former employees say the company has been struggling to raise additional funding.

“Comstellar provided enough money to keep us alive but not enough to sustain a reasonable development schedule,” says one former employee in an email to Light Reading. “Although, if we had received funding and the project was already complete, I have the sneaking suspicion that we'd be in the same boat as [other companies with a product and no customers].”

— Marguerite Reardon, Senior Editor, Light Reading
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LightSwitch 12/4/2012 | 10:19:03 PM
re: Cratos Craters Proof that no matter how well your marketing dept promotes the technical capabilities of your product, if you don't make the deliverable on time and in spec, your time is up.

And the list get smaller...

nuf said
eastcoastvulture 12/4/2012 | 10:19:00 PM
re: Cratos Craters Guess who was behind yet another deadbeat venture ? You guessed it ! It was Comstellar/Redwood Ventures Raj Singh. This guy has been behind lot of dead deals. He backstabbed all of his ventures, was extremely greedy when it came to gouging extra free common stock (besides preferred) for himself, his family and friends. He got what he deserves.
Lightmare 12/4/2012 | 10:19:00 PM
re: Cratos Craters I think you said the last of the 50 employees were let go.

I hear Sanjeev snuck back into the building and has chained himself to the stall in one of (take your guess) the bathrooms.

We'll have to put out an APB to the APD.
BobbyMax 12/4/2012 | 10:18:58 PM
re: Cratos Craters Most of the companies funded by REDWOOD VENTURE have closed down. He has sold his klast company to Cisco Systems for very hefty and unrealistic amount of money.

It is not immediately clear as to why Cisco Systems would pay a big sum of money to acquire a very simple product. Probably his greed did not has any boundaries. But in California culture which truly resembles the culture of third world countries, any thing is possible and has happened in California. There are all kind of cheats who are interested in making a buck.
veluthuru 12/4/2012 | 10:18:56 PM
re: Cratos Craters Bobby_MaxPrejudiced,

Ever heard of Enron ? What about its culture ?
Proud of its "first world country" culture ?

veluthuru 12/4/2012 | 10:18:55 PM
re: Cratos Craters
aha !

A sheep (Harvey Mudd) under
a new clothing (BobbyMax).

Who let you loose on the streets again ?
Did your shrink give up on you ? Do not despair
and give up, there are plenty of them ;->
BobbyMax 12/4/2012 | 10:18:53 PM
re: Cratos Craters Cratos Networks was established to make networking equipment for metro optical networks. There was no particular need for the product Cratos was positioning to produce.Comstellar and Redwood Ventures were planning to fund about 36 optical networking start-ups. Comstellar and Redwood funded Roshnee which closed down.RealChip,another company funded by Redwood Ventures claiming to produce optical and VOIP chips also closed down.

A lot of optical companies with almost identical products mushroomed. In most cases, the products announced by the start-up optical companies were carbon copies of the product portfolios announced by other start-ups The emergence and demise of optical companies was very similar to that of dotcom companies. Most of these companies would not have survived on their own merit. Many prominent companies, for example Lucent, Nortel and Cienna are facing tremenous economic difficulties because of scant need of optical products in the access, metro and long haul environments.
grounded 12/4/2012 | 10:18:53 PM
re: Cratos Craters You sound too much like Sanjeev who still has nothing better to do than trash Raj Singh. If I remember correctly , his only mistake was thinking you new how to develop a product. Cratos, wasted way too much of the 8 million up front before kicking you out. Had he been the type of guy you suggest he would have taken a much tougher stand earlier and found a real CEO and CTO, then maybe the company would have pulled thru. Many good people were driven out by the phsycotic rantings of Sanjeev, (oops sorry you). I know a few of them and they ended up helping the competition instead.
Tim Ber 12/4/2012 | 10:18:52 PM
re: Cratos Craters There should be a negative value allowed for "Rate This Post".
DrFager 12/4/2012 | 10:18:46 PM
re: Cratos Craters Cratos Networks demise was predictable but not because of what Sanjeev Newarikar or Raj Singh did or did not do. Cratos Networks failure was because it as a telecom start-up without an experienced management team. There wasn't anyone on the Cratos senior staff who had taken a telecom product from start to finish. Additionally it should be noted that it is people (management) who make products and it is products which make companies.

I am not an apologist for Sanjeev Newarikar, but to accuse him of the Cratos downfall is nonsense because the post-Sanjeev Cratos staff and the Cratos investors (Comstellar) had sufficient time and opportunity before the collapse to staff the company with a strong executive who was had experience in developing products for the Metro Optical telecom market.

Without question, if an experienced product team had been in place at Cratos, the company would probably still be in business today.
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