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Cyras CEO: 'We're Cleaner'

At a time when optical networking companies have been going public with no revenues and giving potential customers generous equity stakes, officials at Cyras Systems Inc. claim their company is a little different.

In a recent interview with Light Reading, Cyras CEO Steve Pearse said the company plans to be more "conservative" than others in the industry by ensuring that it has a healthy revenue stream and no conflicts of interest by the time it goes public.

Sources close to the company say it will file a preliminary S-1 statement in October, putting it on track for an IPO by the end of the year.

Recently, networking IPOs have been distinguished by their revenue-free earnings statements and the aggressive distribution of pre-IPO shares and warrants to potential customers (see Cosine Spreads the Wealth and Corvis Closes in on IPO ).

But Pearse says the company will definitely have revenues by the time it goes public. "Most certainly before we hit the market we will have revenue," said Pearse. "We're a little more conservative." He says the company currently has five trial customers, and "a couple of orders that will produce revenue in the next few months."

Cyras's first product, the K2, is a high-capacity data switch targeted at the Sonet market. It currently handles 10-Gbit/s interfaces, and the company is planning to add 40-Gbit/s interfaces next year.

Pearse also said he expects the company's S-1 statement to be devoid of the pre-IPO distributions to potential customers that have characterized many recent optical networking IPOs.

"We are far cleaner than what you have been looking at," said Pearse, when asked if his company would be distributing pre-IPO equity to customers. "We're making sure it's a non-issue."

Such an approach requires creative financing. Many of the venture capitalists involved in recent networking IPOs have been instrumental in lining up potentially lucrative customer contracts, while at the same time coordinating the distribution of pre-IPO startup equity to such customers. Rather than going to venture capitalists for its last round of financing, Cyras recently raised $150 million from a private placement of convertible subordinated notes (see Cyras Cuts VCs Out of the Loop ).

-- R. Scott Raynovich, Executive Editor, Light Reading http://www.lightreading.com
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