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Optical/IP

Astral Point Explores Its Options

Astral Point Communications Inc., the Chelmsford, Massachusetts-based optical networking startup, has hired an investment bank to explore a possible sale, according to several Light Reading sources.

The company, which plays in the multiservice metropolitan market, has surfaced as a potential acquisition target in the past. With a shakeout underway in the crowded metro optical market, where at least 30 private companies are vying for customers and/or buyers, the timing may be right to get a big deal done.

"We don't have any comment on our relationships with financial institutions," said Bill Mitchell, vice president of marketing at Astral Point.

How much would the company go for? It's hard to say. There are only two reference points in the same area: Lucent Technologies Inc. (NYSE: LU) purchasing Chromatis for $4.5 billion, and Sycamore Networks Inc. (Nasdaq: SCMR) buying Sirocco Systems for $2.9 billion. But these numbers are misleading (and probably high) because the recent decline of the stock market has knocked some froth out of company valuations -- which means it's hard to evaluate deals in which stock is used as currency. For example, if the Chromatis deal were valued in terms of Lucent's share price today, the deal would be worth roughly half what it was.

Generally, there is skepticism in the metropolitan market because of the proliferation of companies pursuing the same thing. For example, Pat Nettles, the CEO of Ciena Corp. (Nasdaq: CIEN), said recently in a Light Reading interview that he is not impressed with the startup companies in the metropolitan access space.

"What makes us wary in that space is that there are 35 or so companies, depending on how you count, that they all sound a lot alike, and none of them has a lot of customer traction," said Nettles. "One of our primary tenets is to look for customer acceptance of technology as the key indicator of what's going on. That's pretty obvious, but we don't see a lot of people making much headway there."

Astral Point officials say it has shipped some of its primary product, the ON 5000. And they say the company has paying customers on the books.

"We closed our third quarter with revenue on the books," says Mitchell. "How much of that is recognizable depends on the vendor financing. One customer that we've announced in the past is ATG. We have a couple of others that we're in the process of the approvals to announce. We're going to take a conservative approach as we move forward."

-- R. Scott Raynovich, executive editor, Light Reading http://www.lightreading.com

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