x
Optical/IP

Alcatel Acquires Astral Point -- Cheap

Good things come to those who wait. Over a year after Alcatel SA (NYSE: ALA; Paris: CGEP:PA) first put out feelers to purchase Astral Point Communications Inc., it's agreed to buy the startup for stock worth a mere $135 million (see Alcatel To Buy Astral Point).

Alcatel says the acquisition will increase its strength in the U.S. metro Sonet market. Astral Point, founded in 1998 and based in Chelmsford, Mass., makes a multiservice provisioning platform that combines a crossconnect with DWDM and Sonet add/drop multiplexing capabilities.

Reportedly, Alcatel got as far as drawing up papers on the deal last year, but top execs backed out, possibly because Alcatel's other activities interfered (see Alcatel Seeks to Buy Optical Startup, which we summarized in November 2000 as follows: Something optical, metropolitan, and cheap, s'il vous plait. Astral Point, perhaps?).

Over a year later, the buyer's clearly got a bargain. Terms of this acquisition are substantially lower than comparable agreements -- such as the $355 million recently laid out by Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA) for Ocular Networks (see Tellabs Nabs Ocular) or the $421 million Nokia Corp. (NYSE: NOK) bid for Amber Networks in July (see Nokia Nabs Amber for $421M).

Is more than the downturn at work here? Was this a "fire sale," in which lack of new funding forced the startup to sell out or go bust?

The startup's not saying that, but it's clearly had its problems. Despite $115 million in venture funding, it's generating just $4.5 million in revenues annually to a handful of customers. In addition, there have been ups and downs with those customers, the cancellation of an early product, and layoffs (see Astral Point Slims Down). The startup's now down to 175 employees from 250 last year. Alcatel says it hopes to hold onto the existing workers, particularly in management and R&D.

"There's a lot of cutback in the metro space," says Steve Kamman of CIBC World Markets. "As a result, VCs are telling us a lot of startups will just plain get cut off this year."

Alcatel, obviously pleased with the purchase, didn't dwell on the price with analysts and media today. "We had to do something on the Sonet side of our business, and this is positive for us all," said Christian Reinaudo, president of Alcatel's optics activities, in a conference call this morning.

Reinaudo said Alcatel hopes to use Astral Point's product to buttress its own line of metro products, including the 1680 Optical Gateway Cross-Connect (OGX).

He said it was important that the startup was able to demonstrate shipping products -- even though only one of its products, the ON 5000, is actually shipping. The ON 7000, announced last year, is presently in beta test with several prospects, including one ILEC (see Astral Redirects Its Point, Astral Point Starts ILEC Beta, and Astral Point Starts Beta Test). It is expected to ship commercially this quarter.

Astral Point added Sonet STS1 grooming capabilities to its platform with the unveiling of the ON 7000 last year, about the same time rumors first surfaced that Alcatel had come calling.

Alcatel plans to begin selling Astral Point products as-is from its U.S. headquarters, migrating them into Alcatel's network management system within six to eight months. Alcatel also plans to integrate Astral Point's technology into its hardware, using the startup's DWDM and Sonet grooming capabilities to add density to existing Alcatel gear.

Some observers applaud the acquisition, despite the lowball figure. "Wow, that's a low price," says Frank Dzubeck, president of Communications Network Architects (no Website), who acts as an advisor to Astral Point but apparently hadn't heard the published sales figure. "But it's a good fit."

Dzubeck says Astral Point's knowledge of ATM (which he says was a key part of its now-superseded original product) was vital to the choice, since Alcatel relies heavily on ATM in its products.

Also key were Astral Point's early entry to the multiservice provisioning market and its entrée with RBOCs through its certification efforts (see Astral Point Extends OSMINE Effort and Astral Point Wins ISO Certification).

"Astral Point's gotten into RBOC labs, which Alcatel dreams of," Dzubeck says. Despite its ATM orientation, Alcatel hasn't penetrated RBOC networks, which are also ATM-based, to an extent anywhere near to its liking.

Astral Point is only the second optical networking vendor Alcatel's bought within recent months. Indeed, the vendor seemed to lose its optical appetite after acquiring component maker Kymata Ltd. in September 2001 (see Alcatel Optronics Acquires Kymata). But the price was right. And Alcatel apparently thinks it needs the Sonet provisioning capabilities Astral Point has to offer.

Reinaudo stressed this point today, saying Alcatel's acting on forecasts that Sonet will continue to dominate carriers' networks in North America for the foreseeable future. By 2004, Alcatel says, two-thirds of the North American metro optical transport market will still be Sonet-based.

Dzubeck says it's a market that's heating up, driven largely by ongoing developments in streaming video. Multiservice provisioning platforms will likely get scooped up by larger players as demand for metro bandwidth increases due to streaming media applications. "This isn't the last acquisition you'll see in this space, by Alcatel or anyone else," he says.

Alcatel says the acquisition, which is expected to close this quarter, won't affect Alcatel's financials for 2002, but the company hopes to start realizing revenues from Astral Point's products in 2003.

At press time, Alcatel shares were trading at $15.29, down $0.40 (2.55%). — Mary Jander, Senior Editor, Light Reading
http://www.lightreading.com
realdeal 12/4/2012 | 11:00:45 PM
re: Alcatel Acquires Astral Point -- Cheap Friend told me it was 30 cents per share and most paid more than that for the options and lost on the transaction. Hummmm, didn't they turn down a 1.5bil bid last year thinking they could get more? Would you like a bagel with that egg on your face?
fleshpeddler 12/4/2012 | 11:00:46 PM
re: Alcatel Acquires Astral Point -- Cheap
smack is exactly what ciena must be on...
Lafite 12/4/2012 | 11:00:48 PM
re: Alcatel Acquires Astral Point -- Cheap You are exactly right, and that's exactly
why I was having a hard time figuring out
why Ciena would care...
..and I don't mind the ribbing! These boards
are all about trading a little smack among friends. I do appreciate your insights though,
so please, keep them coming.
broadbandboy 12/4/2012 | 11:01:17 PM
re: Alcatel Acquires Astral Point -- Cheap Lafite: "Well that would be nice if I were a member of the press or at a trade show, but seeing as how
I'm neither, and seeing as how I am sure I can
recognize a line card when I see one, and have been in most of the large COs on the east coast, well, that makes your point all the more moronic doesn't it? Why don't you try and do us all some good and try and answer the initial question?"

Sorry Lafite, I was just trying to inject a little humor.

OK, why would Cienna be interested in Equipe? Frankly, It does not make sense to me, unless they see the Equipe box as a big 10 Gig MSPP? They might want to move up from transport into data switch switching?

The Equipe box is a core ATM switch with an optical cross-connect, right? So maybe thats the connection. Still, sounds a little far fetched to me.

BBboy


flanker 12/4/2012 | 11:01:22 PM
re: Alcatel Acquires Astral Point -- Cheap My research

Catch you on the the next wave.
Peace and strength, Y'all.
Lafite 12/4/2012 | 11:01:25 PM
re: Alcatel Acquires Astral Point -- Cheap Broadband boy,
Well that would be nice if I were a member of
the press or at a trade show, but seeing as how
I'm neither, and seeing as how I am sure I can
recognize a line card when I see one,
and have been in most of the large COs on
the east coast, well, that makes your point all the more moronic doesn't it? Why don't you try and do us all some good and try and answer the initial question?
broadbandboy 12/4/2012 | 11:01:27 PM
re: Alcatel Acquires Astral Point -- Cheap Lafite: "Can anyone please provide a reasonable
rationale as to why Ciena would want Equipe?
I visited Equipe several months back, and
they had a very cool box exterior, but when
we looked inside it, there was nothing there!
It looked like it hadn't been built.."

Didn't you ask them why it was empty? Like, Hey! Where's the switch?!

A good explanation would be all the units they have built are out in field trials, but that should have come from them.

I have seen empty cabinets at trade shows; sort of Dilbert-demos with nothing inside. Some vendors figure press and analysts are too stupid to know the difference(Grin). Hmmm, I think I just answered my initial question...

broadbandboy 12/4/2012 | 11:01:28 PM
re: Alcatel Acquires Astral Point -- Cheap I hear its all Cisco, likely MGX8850 for MPLS.
Not Lucent.
myresearch 12/4/2012 | 11:01:28 PM
re: Alcatel Acquires Astral Point -- Cheap >>Employees basically get 63 ALA shares for every 1000 shares of AP. If you assume ALA is at 15/share, thats $.945 per share. Could be less than many of them paid for the shares in the first place. Ouch.<<

This happens to many compnaies. In addition to losing what you paid for, you may have paid Alternative Minimum Tax (AMT) last year when you excised (the valuation at that time may be very high, so the AMT liability was high). Do your work before you excise:-)

MR
myresearch 12/4/2012 | 11:01:29 PM
re: Alcatel Acquires Astral Point -- Cheap

>> I'll give you a "C+" for being aggressive enough to tackle dilution. but there are a lot of posters looking at your note and scratching their heads.<<

Give me a break! You are in no position of marking other's since you calculation is obviously wrong.

Let me say this again, your calculation is
totally wrong. In your previous posting, you
said:

> Round 2: 30mln @110mln valuation
> (6,000,000 shares @ $5) = 24% of shares auth.
> Round 3: 60mln at 500mln valuation
> (6,000,000 shares at $10 = 24% of shares auth.

This is obvious incorrect. The valuation is increased close to 5 times, from $110m to
$500m, how come investing $30m and $60m
get the same amount of shares???

Learn the basics before you pose here as an
expert. Explain with your numbers rather than
attack others with handwaving.

For people who want to learn, there are a
lot of info on the web. For simple tutorials, see
http://ecenter-sloan.mit.edu/1...

MR
PS: Tired of people who has a big ego
flanker 12/4/2012 | 11:01:33 PM
re: Alcatel Acquires Astral Point -- Cheap Didnt mean to be so lewd, rude and crude and in the post. I think you can reverse engineer a ballpark of shares issued per round based on Lu Alum's post and AstralPoint's press releases.

flanker 12/4/2012 | 11:01:36 PM
re: Alcatel Acquires Astral Point -- Cheap Myresearch:

I'll give you a "C+" for being aggressive enough to tackle dilution. but there are a lot of posters looking at your note and scratching their heads.

1) Where are your assumptions? You have definitely assumed a lot regarding liquidity preferences which is not explained in the post.
2) There seems to be a mistake in the round 2 calculation.
3) What about Titanic Optics original question about exercising options? No one asked for a demonstration on the effects of dilution.



aurora 12/4/2012 | 11:01:36 PM
re: Alcatel Acquires Astral Point -- Cheap >>I think he was referring to my earlier post
>>and gee, I thought 50lbs was pretty good for
>>a 120lb woman. Maybe someone is feeling
>>hostile today?

Well I can't speak for him. Maybe he didn't know you were female.

50lbs is pretty good lift for a woman, by the way.

And 120lbs is a pretty good woman to lift. I'd give it a try if you let me!

flanker 12/4/2012 | 11:01:37 PM
re: Alcatel Acquires Astral Point -- Cheap Thanks for the great analysis. But I dont
understand your second post on the percentages:
Can you explain?


Yes. I dont know if you read all the posts but the question was not how to calculate share allocations for each round of financing, but to estimate how shares were distributed during a liquidity event.

The example states that total shares issued and authorized were 24mln+ and we were not dealing with anti-dilution provisions. Thus, the percentages reflect shares issued per round as a percentage of TOTAL shares authorized AND outstanding AFTER the last round or financing ... to reflect the percentage of the company each investor held at liquadation, not at closing of each respective round.

To present the example any other way would confuse the living daylights out of the readers and not address the bottom line question as to how and at what price option holders exercise.

As I mentioned in an earlier post, you can use any final share allocation you like (24mln, 50mln, 100mln) and recalculate the percentage interest held by each investor - since some readers dont think 24mln shares issued is realistic. However, arriving at a realistic number of shares issued isnt the point of the example either. The point was to show liquidity preference and at what price option holders could exercise.


hope that helps

flanker






Lafite 12/4/2012 | 11:01:38 PM
re: Alcatel Acquires Astral Point -- Cheap There was a rumor posted to this board about the two possibly getting together, if you go back and read through all the posts on this string.

I can't really say who I work for. Let's just
say I am an 'interested party'.
MA Headhunter 12/4/2012 | 11:01:40 PM
re: Alcatel Acquires Astral Point -- Cheap More than one ex Avici person has mentioned that the IP backbone is made up of Avici gear. I am not sure about the remainder. LU Springtide had been in there...
realdeal 12/4/2012 | 11:01:42 PM
re: Alcatel Acquires Astral Point -- Cheap Anyone know who's gear AT&T is deploying here?

http://www.att.com/press/item/...



darnlucky 12/4/2012 | 11:01:46 PM
re: Alcatel Acquires Astral Point -- Cheap Can anyone please provide a reasonable rationale as to why Ciena would want Equipe?

I haven't seen anything about Ciena and equipe. What's the scoop? Why were you at Equipe, are you a customer then if you're not a competitor?
glowingduck 12/4/2012 | 11:01:48 PM
re: Alcatel Acquires Astral Point -- Cheap "I would bet that not one of the naysayers has seen the 7000, heard customer feedback or been involved in testing of it. I am not one of the employees there but know enough people and about the product to know that people on this thread are blowing warm air."

Warm air is the only thing keeping this industry alive! Well, that and internet porno!
Lafite 12/4/2012 | 11:01:48 PM
re: Alcatel Acquires Astral Point -- Cheap Can anyone please provide a reasonable
rationale as to why Ciena would want Equipe?

I visited Equipe several months back, and
they had a very cool box exterior, but when
we looked inside it, there was nothing there!
It looked like it hadn't been built...and no,
I don't work for a competitor, so I sincerely
doubt they yanked it to keep it from prying eyes.
lu-alum 12/4/2012 | 11:01:49 PM
re: Alcatel Acquires Astral Point -- Cheap Employees basically get 63 ALA shares for every 1000 shares of AP. If you assume ALA is at 15/share, thats $.945 per share. Could be less than many of them paid for the shares in the first place. Ouch.
myresearch 12/4/2012 | 11:01:50 PM
re: Alcatel Acquires Astral Point -- Cheap Assume that all valuation is post-money (i.e., the valuation after the close of the fund), and
the founder and employee option pool is 10m (the
exact number does not matter - the valuation mattes).

1) First round: $10m at $20m valuation:

Share price: $1
Dilution: 50%
New shares issued to VC: 10m
Founders & Employee option pool: 10m
Total shares: 20m

2) Seond round: $60m at $110m valuation:

Share price: $4
Dilution: 27%
New shares issued to VC: 7.5m
Total VC shares: 17.5m
Founders & Employee option pool: 10m
Total shares: 27.5m

3) Third round: $60m at $500m valuation:

Share price: $16
Dilution: 12%
New shares issued to VC: 3.75m
Founders & Employee option pool: 10m
Total shares: 31.25m

After the 3 rounds: VC holds 68% of
the company, and founders & employees
option pool 32%. Because the valuation
increased substantially each round, the
dilution is quite reasonable. Of course,
we assume no special protection clauses
are attached. In case of APN, this is
the key. If there is protection clause
for "down-round" (i.e., the previous VC's
share price cannot go down.).

Suppose this company is sold for $135m.The price
is $4.32 per share. The 3rd round VC will get
$60m back at $16 per share. The 2nd round VC will
get $31.88m. The first round VC gets $43.2m.
the founders and employee option pool gets $8m
(about 80 cent per share).

MR





myresearch 12/4/2012 | 11:01:50 PM
re: Alcatel Acquires Astral Point -- Cheap Sorry, the pre-money and post-money should
be reversed. Ie.

If $10m at $20m post money, you give away 50%
If pre-money, you give away 33%.

myresearch 12/4/2012 | 11:01:51 PM
re: Alcatel Acquires Astral Point -- Cheap Flanker,

Thanks for the great analysis. But I dont
understand your second post on the percentages:

>Round 1: 10mln @ 20mln valuation
> (10,000,000 shares @ $1)=41% of shares authorized

If you raise $10m on a pre-money value of
$20m, you give away 50% of the shares.
If the $20m is post-money, you give away
33% of the shares. How does the 41% come
from? Can you explain?

MR

> Round 2: 30mln @110mln valuation
> (6,000,000 shares @ $5) = 24% of shares auth.
> Round 3: 60mln at 500mln valuation
> (6,000,000 shares at $10 = 24% of shares auth.
lambdaguy 12/4/2012 | 11:01:51 PM
re: Alcatel Acquires Astral Point -- Cheap Metro Optix is available... no real cusomers
LuxN could still be a good play...40 customers
the options are drying up..........
konaboy 12/4/2012 | 11:01:52 PM
re: Alcatel Acquires Astral Point -- Cheap What about Appian and Alidian? Did they burn out, fade away, or get taken out?
optical_man 12/4/2012 | 11:01:53 PM
re: Alcatel Acquires Astral Point -- Cheap HarveyMudd,
Are you laid off? Do you work? I wonder if your internet access was cut off at work, would you be more productive? You seem to lurk around here bashing everything. You have an opinion on Everything. Do your colleagues not listen to your valued opinions? If they did, would your outlook change?
Bashing startups is like saying the British Empire is brilliant (circa 1890) and all those other startup countries are junk. And what happened?
Try this, say "I will not surf at work for 3 weeks". Can you?
On another note, 80% of all restaraunts fail. Guess we should all just go to McDonalds for all our meals, as this is a LARGE company, therefore has the best value for us....

ps, this message has been posted on 3 different message chains now. Just trying to catch old Harvey (boy, that Nortel facility must have a FAT pipe, the way Harvey gets around LR!)
silent mariner 12/4/2012 | 11:01:55 PM
re: Alcatel Acquires Astral Point -- Cheap You guys are all a hoot. I would bet that not one of the naysayers has seen the 7000, heard customer feedback or been involved in testing of it. I am not one of the employees there but know enough people and about the product to know that people on this thread are blowing warm air.

As far as Alcatel's history, there is no arguing their history...
HarveyMudd 12/4/2012 | 11:01:57 PM
re: Alcatel Acquires Astral Point -- Cheap After a disatrous four years, US Alcatel is not able to do anything on its own. The company's market share is sliding.

All its previous acquisitions have failed miserably. Now it is another mis-step in its product strategy.
gardner 12/4/2012 | 11:02:01 PM
re: Alcatel Acquires Astral Point -- Cheap
Take a look at White Rock Networks stuff (url: www.whiterocknetworks.com).

[shameless sales pitch deleted]

Don't know how real it is but you might want to send them that RFP/RFI.


So, how long have you been working at White Rock? Are the benefits good?
glowingduck 12/4/2012 | 11:02:05 PM
re: Alcatel Acquires Astral Point -- Cheap " Don't know how real it is but you might want to send them that RFP/RFI."

Believe me, sending out RFPs, RFIs, RFQs, etc is all the big carriers know how to do anymore. They're hoping to find one vendor so desperate for $$ that they'll promise OC-768 on a Playstation with free upgrade for life if that's what you want.

White Rock ASKED for the RFI a year ago!
cyber_techy 12/4/2012 | 11:02:07 PM
re: Alcatel Acquires Astral Point -- Cheap --
You must be a real weenie if 50lbs is too much for you though. I hear there's alot of empty space just south of 60 Hudson. Maybe WorldCom could build a new CO and a gym for the 50 lb weenies
--

The signs of current times. A duck challenging a guy
glowingduck 12/4/2012 | 11:02:07 PM
re: Alcatel Acquires Astral Point -- Cheap Despite all his NYC goombah bluster, Telecom_Guy didn't miss the point completely. But by the time Alcatel integrates Astral Point into the dysfunctional Alcatel family, no one will care if NE weighs 50 pounds or if it runs on a Palm Pilot.

You must be a real weenie if 50lbs is too much for you though. I hear there's alot of empty space just south of 60 Hudson. Maybe WorldCom could build a new CO and a gym for the 50 lb weenies.
crossconnect 12/4/2012 | 11:02:07 PM
re: Alcatel Acquires Astral Point -- Cheap We're definately missing the point. Let's get refocused here.
optigirl 12/4/2012 | 11:02:07 PM
re: Alcatel Acquires Astral Point -- Cheap I think he was referring to my earlier post and gee, I thought 50lbs was pretty good for a 120lb woman. Maybe someone is feeling hostile today?

sg38 12/4/2012 | 11:02:10 PM
re: Alcatel Acquires Astral Point -- Cheap I agree wholeheartedly. Those who left were forced to take the stock, at much higher price, even for some current employees. Good luck for AP employees who still have their jobs there.

BTW, nobody really give a true answer on how the stock conversion is done. Any idea?

sg38
Route495 12/4/2012 | 11:02:10 PM
re: Alcatel Acquires Astral Point -- Cheap >Ciena would do well to take in Equipe. Good match.

I hope it works out for the sake of the employees. The alternative seems to be a low valuation round accompanied by the usual badness.
newlegacy 12/4/2012 | 11:02:10 PM
re: Alcatel Acquires Astral Point -- Cheap Excellent point Telecom Guy!!!

Take a look at White Rock Networks stuff (url: www.whiterocknetworks.com). They claim to have a line of 'stackable' components with which you can build the kind of element you need at any given site. E.g., you can build an OC-48 Ring ADM dropping 8 OC-3s in just 1 rack space! If you need some DS3s, just connect up a 3 RU chassis and you can equip up to 48 DS3s. If you need OC192 it looks like you have to go to (oh my!) 2 rack spaces (but you can drop up to 8 GbE from the same shelf!)

Don't know how real it is but you might want to send them that RFP/RFI.
yomama 12/4/2012 | 11:02:13 PM
re: Alcatel Acquires Astral Point -- Cheap right on Litewave, I heard the same thing a couple of months ago when I was having lunch with a couple of former Cascade\Ascend\Lucent buddies that they are in need of some greenbacks.
flanker 12/4/2012 | 11:02:14 PM
re: Alcatel Acquires Astral Point -- Cheap Give your nodes the test I'm going to start to implement for all of my CO's: Can you lift and carry a fully loaded NE with your own hands? I'm going to have that as part of my requirements doc on all our RFP's from now on before you even walk into the door.

How about "Does it fit in the overhead rack of a 757"?

Litewave 12/4/2012 | 11:02:14 PM
re: Alcatel Acquires Astral Point -- Cheap Author: watchtower
Ciena would do well to take in Equipe. Good match.


Whats wrong sonny, Equipe running out of cash? Looks to me like someone is actively shovelling this Ciena-Equipe bull. It makes absolutely no sense for Ciena to take in Equipe.

Why defocus when you've got a good thing going?

Take this somewhere else bub.
blosox 12/4/2012 | 11:02:15 PM
re: Alcatel Acquires Astral Point -- Cheap
Author: watchtower Number: 60
Subject: Re: 1.50 per share Date: 1/23/2002 4:28:41 PM

Ciena would do well to take in Equipe. Good match.


Yeah? How's the juice over there? Tasty?
cyber_techy 12/4/2012 | 11:02:18 PM
re: Alcatel Acquires Astral Point -- Cheap > What a stupid statement. Since when did they
> start allowing the janitorial staff to have
> input to RFP's??

Rude but funny!!
Daveman 12/4/2012 | 11:02:20 PM
re: Alcatel Acquires Astral Point -- Cheap Telcom_Guy,

If you look at the densities and start doing some price per port excercises you will see some clear advantages vis a vi the competition. If the box worked it wouldn't be a bad contender. What I hear is that they still don't have CES to ATM conversions working properly. CES in CES out is ok as is ATM in and ATM out... Many trial customers have complained of their Sonet rings getting trashed by AstralPoint. You just can't bring down a ring and not fail a trial...
watchtower 12/4/2012 | 11:02:20 PM
re: Alcatel Acquires Astral Point -- Cheap Ciena would do well to take in Equipe. Good match.
crossconnect 12/4/2012 | 11:02:21 PM
re: Alcatel Acquires Astral Point -- Cheap There is a rumor floating around that Ciena is talking to Equipe. If true, it will be interesting to see if they go cheap, as well, in order to avoid a down round.
optigirl 12/4/2012 | 11:02:22 PM
re: Alcatel Acquires Astral Point -- Cheap Get real Steeler....Kordell will be on the bench crying after Belicheck's Defense kicks his butt. The Pats are blessed this year and deserve the right to lose to the Rams again.

Re: Astral Point (so as to stay on the subject and not be erased)...does anyone have any information on their OSMINE status and any particualr feedback from carriers who have tested them?
indsavvy 12/4/2012 | 11:02:22 PM
re: Alcatel Acquires Astral Point -- Cheap What a stupid statement. Since when did they start allowing the janitorial staff to have input to RFP's??
silent mariner 12/4/2012 | 11:02:23 PM
re: Alcatel Acquires Astral Point -- Cheap I agree. The Pats ride looks like a rough one. it should be a better game than the Ravens game, though.

......try a buck a share at present levels.
optigirl 12/4/2012 | 11:02:23 PM
re: Alcatel Acquires Astral Point -- Cheap ha ha ha ha....

That's funny but actually an interesting product spec. I do try my best to make it to the gym but I can't really lift more than 50 lbs....

Sounds sort of discriminatory.

:-)
Telecom_Guy 12/4/2012 | 11:02:23 PM
re: Alcatel Acquires Astral Point -- Cheap Who cares how much the employees made. Yeah some made a little bit of money. Others (founders) who had gobs and gobs of options are still doing great. What's the important thing to remember here? Well the important thing is that this was a bad buy for Alcatel because the box isn't going to sell. Have you guys actually seen it? It's huuuuuuuge. A big honkin monster. Yeah, and I'm going to put that big sucker in my CO in the NYC pop and waste all that valuable space. I DON'T THINK SO. Heck there's even floor loading issues in alot of the pops now. Go into 60 Hudson NYC and see for yourself. Space is going for a super premium in Chicago, NYC, and tons of other highly congested areas. Can none of you vendor guys get it right? We don't need bigger nodes. Give your nodes the test I'm going to start to implement for all of my CO's: Can you lift and carry a fully loaded NE with your own hands? I'm going to have that as part of my requirements doc on all our RFP's from now on before you even walk into the door.

-- Just my opinion. Just remember me if you get an RFP / RFI with that request.
crossconnect 12/4/2012 | 11:02:24 PM
re: Alcatel Acquires Astral Point -- Cheap silent mariner, can you fill us in?
most of these postings are filled with speculation. You seemed to be making a statement.
Steeler 12/4/2012 | 11:02:24 PM
re: Alcatel Acquires Astral Point -- Cheap Another point to consider is that AP closed its last round, a C, in July 2000, so it was likely an up round. This means that the employee stakes were never taken down in the interim by a down round ratchet provision. Interestingly, NEA was a big AP investor, and they also have a large stake in Quantum Bridge.

btw, to all the 495ers on this board, your Pats are going down Sunday.
alumna 495 12/4/2012 | 11:02:25 PM
re: Alcatel Acquires Astral Point -- Cheap Employees who left were forward vested, but if they followed the advice of executives and had already paid for those shares (to avoid those big tax bills from all the expected gains!) - they may have paid significantly more than the shares will be worth. This is especially galling because those who left were not given a choice - they were forced to take the stock... Presumably, Astral Point used these funds. So some employees current and former are the potential big losers. There may have been some "re-fresh" or "re-pricing" for those who stayed - but some who left not only lost thier jobs - but had thier money taken. When you hear "the VCs are paying ten times what you are paying for this stock" - they never tell you that all stock is not equal when the company is sold.
flanker 12/4/2012 | 11:02:26 PM
re: Alcatel Acquires Astral Point -- Cheap >It surprises me that no one mentioned that senior mgmt makes its money in other ways during a liquidity event.

>>How so? From retention bonuses? Or non-retention bonus (in some cases)?


Yes.
zoinks! 12/4/2012 | 11:02:26 PM
re: Alcatel Acquires Astral Point -- Cheap >>It surprises me that no one mentioned that senior mgmt makes its money in other ways during a liquidity event.

How so? From retention bonuses? Or non-retention bonus (in some cases)?
lu-alum 12/4/2012 | 11:02:27 PM
re: Alcatel Acquires Astral Point -- Cheap It was actually a smarter move to leave Astral from an equity perspective. (beyond the obvious) Many people had purchased restricted stock (i.e. bought all of their stock up front). Astral was so strapped for cash that when people left they couldn't afford to buy back the shares so they VESTED people who left forward 100%. Bet that makes the average engineer working 7 days a week over there feel nice!
flanker 12/4/2012 | 11:02:27 PM
re: Alcatel Acquires Astral Point -- Cheap $135M-$115M = 20M. ... Am I close?

Maybe, but the methodology is wrong. You need to know what percentage of issued shares were pfd, what the conversion ratio to common was, and also what the liquidity preference was.

It surprises me that no one mentioned that senior mgmt makes its money in other ways during a liquidity event.
crossconnect 12/4/2012 | 11:02:28 PM
re: Alcatel Acquires Astral Point -- Cheap This is a very sad state of affairs for employees who have been working 7 day weeks for 2 years (at least that is what I have heard through the grape vine).

DOes anyone have any real figures?
samTheFish 12/4/2012 | 11:02:28 PM
re: Alcatel Acquires Astral Point -- Cheap Let's take a guess at the real figures. The VC's will get their money back for a start assuming they had preferred shares, so $135M-$115M = 20M. Now lets assume Astral had 100M shares outstanding, so that would be 20 cents a share for the "leftovers". Now lets assume a run of the mill engineer came in early on and got .1%. That would be 100,000 shares, and by now they would probably be all vested or close to it. Let's say they are 75% vested, or 75,000 shares. That would be a bonus of $15,000 minus what it cost to buy the shares, probably pennies a share. Maybe a down payment on a car? So that would be $150K for each percent, if the CEO has 3 percent that would be nothing to sneeze at. (at least for me, maybe CEO's have finer tastes)


So am i close?

samTheFish
silent mariner 12/4/2012 | 11:02:29 PM
re: Alcatel Acquires Astral Point -- Cheap Inaccurate. the actual numbers are % wise significantly below that.
diag_eng 12/4/2012 | 11:02:29 PM
re: Alcatel Acquires Astral Point -- Cheap I heard employees conversion resulted in $1.50/share.

Heard from a co-worker who knows someone there.
erbiumfiber 12/4/2012 | 11:02:29 PM
re: Alcatel Acquires Astral Point -- Cheap 8. In the last year our product design has:

a) Radically changed with each new reorganization designed to meet imagined changing business needs

b) Been refined to a working prototype that we are about to send through potential customer trials

c) We were supposed to be making a product?
dietaryfiber 12/4/2012 | 11:02:34 PM
re: Alcatel Acquires Astral Point -- Cheap 7. Recapitalization.

a) The addition of more capitalists to the company through hiring more advisors.
b) The reset of all valuations, eliminating all previous value and preferences.

dietary fiber
flanker 12/4/2012 | 11:02:34 PM
re: Alcatel Acquires Astral Point -- Cheap b) Liquidation preference? I'd like to liquidate the CEO first, then the CFO, then the marketing guy...

I havent laughed this hard since toll booth willy stopped posting on this site.
Titanic Optics 12/4/2012 | 11:02:35 PM
re: Alcatel Acquires Astral Point -- Cheap 6. Liquidation preferences:
a) The VCs that are invested in my firm have liquidation preferences on their stock and get all their investment back before there is a pool of money for the options.
b) Liquidation preference? I'd like to liquidate the CEO first, then the CFO, then the marketing guy...

fleshpeddler 12/4/2012 | 11:02:36 PM
re: Alcatel Acquires Astral Point -- Cheap
Author: Titanic Optics Number: 27
Subject: Idea for LR survey Date: 1/22/2002 3:37:01 PM
.
.
.
4. Our last round was a down round...
a) My company informed me of this and told me what the dilution meant in terms of my share options
b) Down round, does this mean everybody was upset, i.e. "down" about life?

c) My CEO had the said that "Dilution is good." so why should I be concerned?


5. Our burn rate sum over the next year exceeds our financing.

a) I know what our burn rate is and am confident there are plans to secure more funding. As a precaution employees have been contacted about volunteers for reduced hours, job sharing, getting on spouse's benefits, etc. while the company has made attempts at saving (cut meals, reduce attendance on biz trips, etc.)

b) Our company does not share burn rate information.

c) What's a burn rate? I feel burned, is this what you mean?


flanker 12/4/2012 | 11:02:37 PM
re: Alcatel Acquires Astral Point -- Cheap Titanic Optics ~ silent mariner ~ optical_maverick

I have no idea how many shares issued AstralPoint has and I would never venture to guess. I am just using the example Titanic gave me. You can plug in any number of total shares issued you like and figure out the allocation.
optical_maverick 12/4/2012 | 11:02:37 PM
re: Alcatel Acquires Astral Point -- Cheap well said.......but we know Mr. Raj probably made some money.

Mavi
Titanic Optics 12/4/2012 | 11:02:37 PM
re: Alcatel Acquires Astral Point -- Cheap The example I wrote for Flanker to comment on was hypothetical, and not necessarily about Astral Point.

I made up the numbers, which were common to many of Astal Point's peers.

Titanic
silent mariner 12/4/2012 | 11:02:38 PM
re: Alcatel Acquires Astral Point -- Cheap OM and flanker. Add your numbers and divide by 2 seems more realistic given the excessive valuations during the final funding round.

also, all of the assumptions can be tossed. I bet the vc's took their money or the bulk of it leaving all employees with a flat rate at significantly below the average announced deal numbers. Every start-up that i can think of all the way back to Coral networks has run it that way when dealing with low end buyouts.
Titanic Optics 12/4/2012 | 11:02:38 PM
re: Alcatel Acquires Astral Point -- Cheap >>Employees with options at strikes:

50 centsGǪ would make $5.59 per share
$1.00GǪ would make $5.09 per share
$2.50GǪ would make $3.59 per share

REMEMBER, WE ARE ASSUMING NO ANTI DILUTIPON PROTECTION OR LIQUIDITY PREFERENCE. THOSE TWO ASSUMPTIONS REDUCE THE PER SHARE DISTRIBUTIONS TO OPTION HOLDERS AND COMMON SHARE HOLDERS.<<

Thanks, good case study. Interesting to note that the employees did quite well here, as well as the original VCs. The investors that were new in Round 3 (hoping to score a quick buck in the IPO) lost their money.

In my scenario, I doubt that the Round 3 investors got any preferences. Of course, if we take this case further, and add Round 4, $20 million invested, post money at $150 million (down round), the picture probably changes and the two assumptions break down.
optical_maverick 12/4/2012 | 11:02:38 PM
re: Alcatel Acquires Astral Point -- Cheap flanker,
nice illustration of the dillution but there is no way they only have 24million shares out. My estimates have the number at 100million+......and this may be a conservative number.....probably more like 150million.

Mavi
realdeal 12/4/2012 | 11:02:38 PM
re: Alcatel Acquires Astral Point -- Cheap Flanker- Are you stating that Astral Point had only ~24mil shares outstanding? Did they do a reverse split? 24mil sounds low for a company having 3 rounds of funding. Are you sure about this figure?
flanker 12/4/2012 | 11:02:39 PM
re: Alcatel Acquires Astral Point -- Cheap 24,643,585 shares issued & authorized - common & pfd

The above assumption is OK, I had to correct the percentage allocations.

Round 1: 10mln @ 20mln valuation
(10,000,000 shares @ $1)=41% of shares authorized
Round 2: 30mln @110mln valuation
(6,000,000 shares @ $5) = 24% of shares auth.
Round 3: 60mln at 500mln valuation
(6,000,000 shares at $10 = 24% of shares auth.

This leaves mgmt with a residual 2,643,585 shares
= 10.73% of shares outstanding.

(BTW: 41% + 24% + 24% + 10.73% = 100% of 24,643,585 shares)

flanker 12/4/2012 | 11:02:39 PM
re: Alcatel Acquires Astral Point -- Cheap OK, but we have to assume many things:

1) 24,643,585 shares issued G no dilution protection for pre-existing investors
2) no liquidation preference
3) predetermined dilution according shares issued and your assumptions
4) options are convertible into common shares and are reserved among the 24,643,585 shares (ie, no further dilution).

Assuming this we have:

Round 1: 10mln @ 20mln valuation
(10,000,000 shares @ $1) = 50% of shares sold
Round 2: 30mln @110mln valuation
(6,000,000 shares @ $5) = 27.27% of shares sold
Round 3: 60mln at 500mln valuation
(6,000,000 shares at $10 = 12% of shares sold

This leaves mgmt with a residual 2,643,585 shares
= 10.73% of shares outstanding.

(BTW: 50% + 27.27% + 12% + 10.73% = 100% of 24,643,585 shares)

If mgmt and the other investors had dilution protection, there would be more shares floating around, and employees options would worth less.

If the company were sold for $150mln with no liquidation preference (first dibs), then the conversion price is $6.09 ($6.09 x 24,643,585 = $150,000,000)

Employees with options at strikes:

50 centsGǪ would make $5.59 per share
$1.00GǪ would make $5.09 per share
$2.50GǪ would make $3.59 per share

REMEMBER, WE ARE ASSUMING NO ANTI DILUTIPON PROTECTION OR LIQUIDITY PREFERENCE. THOSE TWO ASSUMPTIONS REDUCE THE PER SHARE DISTRIBUTIONS TO OPTION HOLDERS AND COMMON SHARE HOLDERS.

flanker
johnjohn 12/4/2012 | 11:02:39 PM
re: Alcatel Acquires Astral Point -- Cheap I guess ALA didn't learn about the challenges of integrating start-ups during their merger talks with LU :)
[email protected] 12/4/2012 | 11:02:40 PM
re: Alcatel Acquires Astral Point -- Cheap Nobody wins in this scenario, except maybe Alcatel (Only the future will tell).

However there are no big loosers here either.

The VC's lose some money but their focus is 2 homers for every 10 at bats. They got some of their cash back.

The Engineers will have some stability at Alcatel at a time when working with system level companies is akin to playing russian roulette.

For everybody that has a vested interest in the DWDM space it is one step closer to the capitulation that will mark the bottom and the chance for growth to begin


diag_eng 12/4/2012 | 11:02:40 PM
re: Alcatel Acquires Astral Point -- Cheap (or a little over a year)

Weren't Alcatel and AP were close to a deal in late 2000 for around $1B?
Titanic Optics 12/4/2012 | 11:02:40 PM
re: Alcatel Acquires Astral Point -- Cheap 1. My stock options were issued at:
a) Same price as preferred round for investors
b) 20% or less discount to preferred round
c) greater than 20% discount to preferred round
d) have no idea what preferred round is

2. I have 10,000 share options.
a) I know what fraction of the total share pool this is
b) I have no idea if there are 100k shares or 1 trillion shares

3. I know what our last post-money valuation was
a) true
b) false

4. Our last round was a down round...
a) My company informed me of this and told me what the dilution meant in terms of my share options
b) Down round, does this mean everybody was upset, i.e. "down" about life?
silent mariner 12/4/2012 | 11:02:40 PM
re: Alcatel Acquires Astral Point -- Cheap The 7000 is a year and a half old and is just becoming available. If you are going to dump on a comapny, at least have some of your facts straight. You must be referring to the 5000. I hear that there are positive applications coming for that box though it is certain that the 7000 was the target here.
Dawg2001 12/4/2012 | 11:02:41 PM
re: Alcatel Acquires Astral Point -- Cheap Metro-Optix is still out there....for now...
yomama 12/4/2012 | 11:02:41 PM
re: Alcatel Acquires Astral Point -- Cheap My pick is : Tellabs will acquire Sycamore before July 2002.
erwin 12/4/2012 | 11:02:42 PM
re: Alcatel Acquires Astral Point -- Cheap When Astral Point last raised its capital, namely May-June 2000, optical valuations were still in their "ridiculous" stage, and thus the total $113M of equity raised in that and previous rounds would have been at valuations that would have led VC's to significantly lose money on a $135M sale.
The only caveat would be if there had been any recent, unannounced working capital infusions to keep the company alive until a sale, which could have been very likely since Astral Point's mid-2000 cash was nearly exhausted by now (part of the reason behind the downsizing). In that case you can bet your children that the VCs would have put onerous terms for any bridge investments including a way lower valuation and liquidation preference terms. That is if they were smart VCs, which remember we have to question since they invested in Astral Point in the first place.

And now on to the second point (pardon the pun). However can Alcatel even see value in this company, when it has struggled for 2 years hawking a box that didn't seem to meet any market or architecture requirement, which bought some of its customers with stock options, and which hired industry rejects such as Bryan Hall which have worked for nearly every telecom company out there (and been fired from a few)?

So maybe the founders did get away with a load of cash? Who knows...do you?
Tudy 12/4/2012 | 11:02:42 PM
re: Alcatel Acquires Astral Point -- Cheap Cerent, Siara, Sirroco, Chromatis, AstralPoint, Cyras have all been acquired who remaining in the mspp area. Did geyser and mayan go by way of the dinosaurs?
silent mariner 12/4/2012 | 11:02:42 PM
re: Alcatel Acquires Astral Point -- Cheap Unless you back out all of the investment cash first and divide the remaineder by the number of shares held by the employees. The math can be very different if that were to take place. After that, subtracting the vesting price comes into play to determine a positive or negative result.
Titanic Optics 12/4/2012 | 11:02:43 PM
re: Alcatel Acquires Astral Point -- Cheap >>Gernerally the liquidation preference is on "dollars invested" not the valuation. A 3x liquidation preference on $10mln invested at a $300mln valuation in a company with $40mln in existing invested capital is $30mln, not $900mln ($300mln x 3) nor $150mln ($40mln+$10mln x 3).<<

Let's say there is $100 M invested, with $10 M Round 1 ($20 M post-money valuation, employee stock $0.50 share, preferred round $1 share), $30 M round 2 ($110 M post-money valuation; employee $1 per share, preferred round $5 per share), and $60 M for round 3 ($500 M post-money valuation; employee $2.50 per share, preferred $10 per share). The company sells for $150 million. Who get's what? I didn't quite follow your example, but would welcome a very detailed breakdown. This would be a great, valuable tutorial for all the engineers that read lightreading who hold stock options.

Hoping your options aren't underwater,
Yours truly,
Titanic Optics
Route495 12/4/2012 | 11:02:45 PM
re: Alcatel Acquires Astral Point -- Cheap So assuming there were 90m shares of AP which got exchanged for 9m alcatel shares.
Employees got one Alcatel share for every 10 AP shares. Assuming an engineer has 20000 AP shares which got converted to 2000 alcatel shares.
At $15 per Alcatel share, will it be $30,000?
It is a nice little bonus if nothing else, plus most of them also retain their jobs.



flanker 12/4/2012 | 11:02:45 PM
re: Alcatel Acquires Astral Point -- Cheap ...the liquidation preferences can be out of control...an example I recently became aware of was a local (495 ish) edge startup had to give 3 t 1 liquidation preferences to receive their most recent round (to keep the doors open)...what does that mean? If the amount of investment into that company was, oh, a total of $100m for all rounds...the common shareholder wouldn't receive a dime unless the sell price was over $300m

Gernerally the liquidation preference is on "dollars invested" not the valuation. A 3x liquidation preference on $10mln invested at a $300mln valuation in a company with $40mln in existing invested capital is $30mln, not $900mln ($300mln x 3) nor $150mln ($40mln+$10mln x 3).

I am curious if anyone is engineering them differently.

Flanker
flanker 12/4/2012 | 11:02:46 PM
re: Alcatel Acquires Astral Point -- Cheap 18% return on an investment in the optical space looks pretty darn good right now when you consider how far behind you would be if you had invested $$$ in the other companies out there....

You can't estimate the return on equity or investment because you don't know the valuation for each round of financing. It's likely the round 1 investors made a little something and that the investors in round 2 or 3 lost everything or got a few pennies back on each dollar invested (ie, lost money).

Cheers to Alcatel for the bargain purchase. About time the VCs learned they over-invested in the sector.





salsa 12/4/2012 | 11:02:46 PM
re: Alcatel Acquires Astral Point -- Cheap It is a good deal for everyone, given the current conditions of the market. Days of getting rich out of a start-up are over, and I don't think employees will complain (assuming they are paid mostly in cash, rather than stock options).
tiadakola 12/4/2012 | 11:02:46 PM
re: Alcatel Acquires Astral Point -- Cheap Agreed...the liquidation preferences can be out of control...an example I recently became aware of was a local (495 ish) edge startup had to give 3 t 1 liquidation preferences to receive their most recent round (to keep the doors open)...what does that mean? If the amount of investment into that company was, oh, a total of $100m for all rounds...the common shareholder wouldn't receive a dime uless the sell price was over $300m...OUCH BABE!
tiadakola 12/4/2012 | 11:02:47 PM
re: Alcatel Acquires Astral Point -- Cheap Actually, not necessarily true...depends on who holds the preferred stock versus the common shares. And also it depends on some of the other financial ratios (especially when accepting a down round...if AP had to, can't remember)...some of these things can be quite onerous.
etherguy 12/4/2012 | 11:02:47 PM
re: Alcatel Acquires Astral Point -- Cheap i don't think this is considered a disaster by the vc's. these days the vc's are getting "liquidation preferences" which means that to a point, any liquidity generated by ipo or sale of the company goes straight to the vc's and whatever is left goes to employees. i'm not saying the vc's in this case had this provision but i wouldn't be surprised. i heard the vc's had a small loss in this deal and the founders got a couple of bucks, the employees get to keep their jobs a little longer. i'm thinking: not a home run but not geyser either.

optigirl 12/4/2012 | 11:02:47 PM
re: Alcatel Acquires Astral Point -- Cheap I wouldn't be so sure that the empoyees got anything out of this. I would hope that they would but that's being unrealistic.

Disaster? Depends on what you compare it to. Not a great way to impress your clients but again, it's better than shutting the doors and getting nothing and sometimes, that's the best you can do.
sjd5 12/4/2012 | 11:02:48 PM
re: Alcatel Acquires Astral Point -- Cheap A big dissapointment for AP employees. Big changes
working for Alcatel.

I would expect alot of them to bail out.
If they can find a place to go, that is.
apucheril 12/4/2012 | 11:02:48 PM
re: Alcatel Acquires Astral Point -- Cheap Astral Point and Alcatel deserve the credit in saving the technology by getting into this agreement.
optiplayer 12/4/2012 | 11:02:48 PM
re: Alcatel Acquires Astral Point -- Cheap The VC's invested $115M but they didn't get the whole $135M (some portion must have gone to the emplyees) so they lost money - there was no 18% return

This was a disaster from a VC perspective.
optigirl 12/4/2012 | 11:02:49 PM
re: Alcatel Acquires Astral Point -- Cheap Sad but probably true....and there is nothing to say that they will get to keep their jobs either. Expect to see a lot of cuts coming soon for non-important or redundant persona.
optigirl 12/4/2012 | 11:02:49 PM
re: Alcatel Acquires Astral Point -- Cheap 18% return on an investment in the optical space looks pretty darn good right now when you consider how far behind you would be if you had invested $$$ in the other companies out there....

Sometimes you just have to say, "the glass is .02 ounces full".

:-)
billy_fold 12/4/2012 | 11:02:49 PM
re: Alcatel Acquires Astral Point -- Cheap And I bet the employees got washed out.

Billy
etherguy 12/4/2012 | 11:02:50 PM
re: Alcatel Acquires Astral Point -- Cheap predictions? $135m. on $115m invested. pretty sorry.
mplsrocks 12/4/2012 | 11:02:50 PM
re: Alcatel Acquires Astral Point -- Cheap Sonet or Next gen SONET as it has now come to be called still sells. And it will continue to outsell the DWDM equipment by a huge margin. This acquisition highlights the fact that SONET beacuse of its ominpresent nature in the incumbents nettworks isn't going anywhere in a hurry as many optical vendors would have us to believe.

The fact of the matter is that SONET will remain in the carriers networks till the vendors can show the carriers that they have an all optical DWDM solution which can do all that SONET can do, and much more..

SONET is here to stay and technologies that can use SONET as a migration path to all optical networks will emarge the winners
samTheFish 12/4/2012 | 11:02:51 PM
re: Alcatel Acquires Astral Point -- Cheap The story says Astral Point cancelled their initial product - it was their second product, the ON2000, that they cancelled.

SamTheFish
HOME
Sign In
SEARCH
CLOSE
MORE
CLOSE