AcceLight Scores Major Change
AcceLight Networks Inc., a startup building an optical switch for the core of telecom networks, announced today that it has closed a $60 million second round of equity and debt financing (see AcceLight Accepts $60M). Not only is this a relatively large round by today’s standards, but it is somewhat surprising, given that other startups in this product category seem to be struggling to gain traction.
AcceLight is building a box that combines IP packet switching and routing, TDM services, and wavelength services all in one box. If the strategy sounds familiar, it should. The idea of this so-called "God-box" approach came into vogue in late 1999; but in 2001, as carriers cut back on capital spending to focus on more traditional network upgrades, the idea has fallen out of fashion.
While proponents of the God-box say that it can save carriers 50 percent to 60 percent in capital spending as well as operational costs, the reality is that it has been a tough sell so far. Competitors like Atoga Systems, which raised $64.5 million in two rounds, and Village Networks Inc., which raised about $50 million, now seem to be struggling.
Just last week, Atoga confirmed that it had laid off "between 75 and 100” of its staff (see Atoga, Village Networks Scale Back). Village Networks also cut about 80 employees last week. Both companies said they were trying to conserve cash, but Village indicated that it has one lab trial going on in Asia, with three more on the drawing board. Atoga has been rumored to be in trials with AT&T Corp. (NYSE: T).
These layoffs and cutbacks in spending indicate one of two things. Either the products are taking longer to develop, or the market is developing much more slowly than had been anticipated. In either case, it makes for some challenges for AcceLight.
Other companies in the space have had their struggles. Ilotron and IP Optical Inc. have been gutted and sold (see Ilotron Hits Hard Times and Altamar Buys Ilotron Remains). Not much has been heard from Chiaro Networks or Mahi Networks Inc.
But AcceLight says it has an edge on the competition. For one, it says its product is designed for the core of the network, whereas Atoga and Village Networks are designing boxes with less capacity for the network edge. Hyong Kim, president and CEO of AcceLight, says the first release of the Photonic Service Switch can scale from 80 Gbit/s to 1.2 Tbit/s. He says the second release will scale to 5 Tbit/s of capacity. He claims that this allows carriers to start with a small footprint and incrementally upgrade their systems to satisfy a growing network.
And while the AcceLight box is capable of supporting IP routing, TDM switching, and wavelength services on the same platform, Kim says that carriers can choose to populate the box to handle just one of these functions.
"If they want to use it just for IP routing, our product is as good as, or better than, what is currently available,” he says. “The same for lambda switching and TDM. We give carriers the insurance that lets them configure the box how they want now and change it later. They don’t have to collapse all those functions into one box right now."
Kim says these are the factors that prompted the company’s initial investors -- Menlo Ventures and Venrock Associates, along with new investors CDIB Ventures, Granite Global Ventures, Mitsubishi Corporation, NIF Ventures, Stonewood Capital Management, Western Technology Investment, Whitecap Venture Partners, and Vertex Management -- to invest in the second round. While he wouldn’t comment specifically on the company’s valuation, he did say that it rose from its previous round.
Currently, AcceLight has 189 employees, and Kim says that they are planning to raise that number slightly to 200 over the next few months. No customers have been announced, but he says the product is going into trials now and general availability is expected in the first half of this year. He believes the company could generate enough revenue to break even in 2003.
— Marguerite Reardon, Senior Editor, Light Reading