Looking at M&A Aftermath

Headcount Light Reading 5/19/2005

The phrase "a merger of equals" is a nice idea, but there really is no such thing. When two companies combine, the acquirer is in the driver's seat, putting the acquirees at the mercy of the new owner.

This leaves for some nervous optimism at edge router vendor Laurel Networks Inc., which managed an exit this week when it was bought by ECI Telecom Ltd. (Nasdaq/NM: ECIL). The price tag wasn't exactly cause to break out the champagne. Laurel was acquired for a price that equaled barely 75 percent of the amount its investors had poured into the company since its inception (see ECI Closing in on Laurel, ECI to Buy Laurel for $88M, ECI Draws Up New Dance Card, and ECI's Laurel Hedge). This stands in stark contrast with the case of Timetra Networks, another edge routing vendor that was acquired for nearly double that price, by Alcatel, for $150 million in 2003 (see Alcatel & TiMetra Seal the Deal).

But if you're an employee in the deal, you have to look at the bright side. Stephen Vogelsang, co-founder and vice president of marketing at Laurel, admits the price tag didn't exactly match everybody's dreams, but he points out that ECI looks serious about its expansion in edge routing and the North American market.

"When we started the company in 1999, we expected a grander outcome. But ECI is an aggressive company and we feel good about what they want to do," says Voglesang, who asserts that he and most of Laurel's 150 employees will stay put at ECI, working out of Laurel's Pittsburgh headquarters.

For those wondering what happened to the stock options, Laurel employees held common stock, which looks to have been rendered useless as the preferred money came out first. But they don't go away completely empty-handed. Voglesang says Laurel employees got new ECI stock and incentive retention cash bonuses to stay on board.

That said, there's quite a bit of healthy debate happening on the topic of what employees face when their employer is acquired on our message boards.

And, while you're masterfully debating the issue, we'll move on by bringing you the most interesting hirings and firings from the past few days:

You're fired, eh?: Ciena Corp. (Nasdaq: CIEN) is cutting some heads in its broadband access group, the group that it acquired when it bought Catena Networks.

The cuts will total 90 employees according to Ciena, which is 10 more than first reported in the Ottawa Citizen. [Ed. note: Hiya, Bert!]. Ciena's total headcount at the end of the first quarter 2005 was 1,668.

The company tells Headcount that it "remains committed to its broadband customer base and product lines" and that this action is "part of the overall efforts to achieve profitability."

The Ottawa facility will continue to be Ciena's headquarters for its access business and the lead center for access-related research and development.

Tubthumping: Congratulations to Chuba Udokwu, who recently was promoted to the position of vice president of engineering at Mintera Corp. We here at Headcount recall that only a few years ago we led many a Jazzercise session with Chuba Udokwu's radio smash, "Tubthumping." It really was a great song for aerobic activity because of that lyric, "I get knocked down. But I get up again." Such a positive attitude.

Fair WARNing: A swim through the state of California's Worker Adjustment and Retraining Notification (WARN) Act notices shows that SBC Communications Inc. (NYSE: SBC) is clearing out some of its call centers and Avanex Corp. (Nasdaq: AVNX) is making a steady series of cuts in its Fremont facility. Some selected notices, which are filed by companies in the state, are in the chart below:

Table 1: California WARN Act Filings (as of May 2005)

Layoff Date	Company Name	Location	Employees Affected
1/4/2005	SBC West - Consumer Markets Group Call Center	Riverside	93
1/16/2005	Alcatel USA Resources, Inc.	Petaluma	75
2/12/2005	Motorola, Inc.	Pasadena	46
2/20/2005	Alcatel Internetworking	Calabasas	51
3/22/2005	Copper Mountain Networks, Inc.	San Diego	49
3/31/2005	Tellabs - Telliant 5000	San Jose	59
3/31/2005	Transmeta Corporation	Santa Clara	306
4/1/2005	Avanex Corporation	Fremont	2
4/15/2005	Siemens Communications, Inc.	San Diego	88
5/1/2005	Avanex Corporation	Fremont	36
5/17/2005	SBC West - Consumer Market Group Call Center	Stockton	111
6/1/2005	Avanex Corporation	Fremont	4
8/1/2005	Avanex Corporation	Fremont	44
10/1/2005	Avanex Corporation	Fremont	3
	TOTAL		967
Source: State of California Employment Development Department

Speaking of WARN notices, KMC Telecom has disclosed it will wipe 30 jobs from its Bedminster, N.J., facility by June 30. Meanwhile, Verizon Wireless will bounce 240 from its Morristown, N.J., facilities, according to paperwork filed with the N.J. Dept. of Labor and Workforce Development.

Job security: Mick Scully, the former CEO of Appian Communications, has surfaced again as the VP of product management for the Security Technology Group at Cisco Systems Inc. (Nasdaq: CSCO) (see Appian Goes to Auction). He reports to Jayshree Ullal, senior VP and general manager for the group.

Roux Paul: Paul Harrison, formerly of Ekinops SAS and Xtera Communications Inc., has landed at BTI Photonics Inc. in Richardson, Texas, as that company's VP of sales and business development. BTI, which has been around since 1997, describes itself as a "global supplier of Metro Edge systems for the build out of new broadband services."

We wrap up, as usual, with a summary of other industry appointments and disappointments from the past few days:

That's all for now. Keep those news tips coming to [email protected].

— Phil Harvey, News Editor, and R. Scott Raynovich, US Editor, Light Reading