Optical/IP Networks

Équipe Forfeits Match

Is Lucent Technologies Inc. (NYSE: LU) having its revenge on Équipe Communications Corp.? Or will it still buy assets from them?

Those questions hang in the air as the Acton, Mass.-based ATM/MPLS core switch vendor Équipe has, according to sources, decided to shut its doors. Sources close to Équipe say Lucent offered to buy the company for a modest price -- less than $15 million -- but for a company that consumed more than $100 million over the years that's clearly not any sort of victory. There's some mystery as to whether that deal is still on the table.

"Certainly it wasn't a generous offer," says one source with direct knowledge of the latest proceedings. "But it did give them something to save face."

In March, Light Reading reported that Équipe and Lucent were in acquisition talks. At that time, it was hard to get a read on how Équipe was going to survive if it didn't somehow arrange for an exit (see Sources: Lucent Talking to Équipe).

Lucent, unfortunately, won't comment on its dealings with Équipe. Équipe's executives did not return calls, and the ones we caught on the phone weren't helpful.

"I don't have a comment on anything," cofounder Chris Noel spluttered, before hanging up.

So is Équipe shut for good or selling its scraps? The answer may be both, as some speculate that it's shutting down and shedding overhead before selling some assets to Lucent.

Even if the two companies don't end up together, they have some noteworthy history. Several members of Équipe’s core team arrived there from Lucent (where they had landed after Lucent acquired Ascend in 1999).

In 2000, Light Reading reported that those Équipe employees had been working on Lucent's next-generation ATM switch, code-named "Oz," among other projects, at the time they quit (see Lucent Losing Grip on ATM Core?).

Équipe has raised $103 million since its inception in 1999, but the 62-person company's most recent funding round of $40 million came more than two years ago. It had secured an agreement to offer Fujitsu Network Communications Inc. (FNC)'s engineering, installation, and product support. But it had no customer to offer them to.

It also had an investment and a reseller agreement with Ciena Corp. (Nasdaq: CIEN), and Ciena had agreed to provide Équipe's (theoretical) customers with technical support. But even Ciena, a vendor often in the wrong place at the wrong time, dismissed the company. "Their segment of the market just isn't our primary focus right now," a Ciena spokesman told Light Reading in February (see Équipe & Ciena: We're Fine).

There may be several reasons why Équipe didn't catch on. Carriers may have been concerned with using an unproven startup's product so close to the core of their networks. And many operators are choosing to deploy MPLS in the core with routers, not ATM switches, according to Scott Clavenna, chief analyst, Heavy Reading

There's also the problem of funding. When Verizon Communications Inc. (NYSE: VZ) finally indicated some interest in the product, sources say Équipe couldn't hang on long enough to survive Verizon's sales cycle, which, at the network's core, is excruciatingly long.

However, Équipe's technology and patent portfolio may yet see daylight if Lucent or another suitor picks it up. While that's being sorted out, its employees appear to be off for a long, long weekend.

— Phil Harvey, News Editor, Light Reading

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