Atoga, Village Networks Scale Back

Atoga Systems and Village Networks Inc., the startups most associated with the nascent market for a type of networking gear called optical packet nodes, have suffered layoffs recently, throwing the viability of the sector into question.

Optical packet nodes are devices that combine wavelength switching with IP routing -- not a simple task by any means (see Optical Taxonomy, page 10). Indeed, analysts have hounded startups for months with questions about the issues involved in packing two hefty technologies in one box (see God is Dead).

Atoga and Village have stood firm, maintaining their wares can save carriers money by selectively mapping metro services onto the wavelengths best suited to carry them. Both companies were well funded intially -- Atoga scored $64.5 million in two rounds (see Atoga Systems and Atoga Gets Another $50M), while Village got about $50 million in two rounds (see Village Networks Has $40M 2nd Round). Both have claimed to be in trials and gaining market traction.

Lately, however, the reduction in carrier capex has left the pair in a perilous position. Without a track record among existing carriers, it's increasingly unlikely they'll be able to get any sizeable installations until providers are once again willing to expand their networks. And even then, it's a question as to whether customers will opt for an unproven technology.

Both startups now face the possibility that they may be ahead of their time.

Atoga confirms that it's suffered a layoff. "We made a strategic decision to strengthen our financial position to enable us to meet the changing needs of the market," writes P.G.K. Menon, cofounder and VP of marketing, in a note to Light Reading.

Menon declines to give out figures as to the number of employees the company lost, but he says the firm now has "between 75 and 100." Back in May 2001, the firm told an online recruitment firm advertising at the Networld+Interop trade show in Las Vegas that it had 120 employees, which indicates it's lost anywhere from 16 percent to 37 percent of its workforce.

But Menon's far from throwing in the towel. The company has four trials going, he says, although he won't say where. Earlier this year, the company was said to be trialing its wares at AT&T Corp. (NYSE: T).

Menon also says Atoga's gear now features tunable lasers, which he says minimize sparing costs for carriers, enable them to increase network capacity without truck rolls, and "satisfy demand variability by simply tuning to the right wavelengths."

While Atoga struggles to make its point, Village Networks is similarly challenged. Spokespeople confirm that the startup has laid off about one third of its staff, leaving them with about 80 employees. They say Village has one lab trial going on in Asia, with three more on the drawing board, also in Asia.

Unlike Atoga, Village isn't interested in adding tunable lasers to its wares. "We think tunables are mainly to simplify inventory, and they increase the cost of our product," a spokesperson says.

What's next? It's hard to say. Other companies involved in this space, albeit for the network core, haven't done well: Ilotron and IPOptical were scuttled (see Ilotron Hits Hard Times and Altamar Buys Ilotron Remains). Luxcore Networks Inc. has changed its business plan (see Luxcore Pulls a Switcheroo). And news from Accelight Networks Inc. and Chiaro Networks has been minimal.

— Mary Jander, Senior Editor, Light Reading
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lightbulb0 12/4/2012 | 7:35:00 PM
re: Atoga, Village Networks Scale Back It is pitty to see a disgruntled employee bashing his former employer. But isn't it the risk you have to take when joining a startup? Isn't it true that we all were told not all startups work out well. Greed is good to ispire you to take the risk but dont let it dominate your life. I personally think Atoga and Village heading into the right product direction but far ahead its time. And worse of all, they never accumulate enough engineering expertise to execute their vision. What was left were the marketing hype otherwise would be perfect vision.
Paul Goldsmith 12/4/2012 | 7:34:59 PM
re: Atoga, Village Networks Scale Back Jey,

You are unlucky guy to join Atoga by their HYPE news. Acturally, I have posted a message in Jan/01 to mentione this hype. Please see the discussion talks under the article.

mr telephone 12/4/2012 | 7:34:58 PM
re: Atoga, Village Networks Scale Back telecom,
where did you go to school? since when is 1/3 90%.
You should bone up on your math skills before you make comments. And yes you do speak bullshit.tuna fish anyone?
opticaltalent 12/4/2012 | 7:34:58 PM
re: Atoga, Village Networks Scale Back
Does anyone really think they are going to make it??? Atoga is a textbook example of a company that was heavy on the story and light on delivery.

Hey...Atoga's mgmt. team...didn't you get the memo...smoke and mirrors selling techniques stopped in 99'!!!
lightbulb0 12/4/2012 | 7:34:57 PM
re: Atoga, Village Networks Scale Back word to ATOGA:

This is not the end of the world. There are still chances to stage a come back when market turn around. Here is what you need to do:
1. communicate well with VC community and use capital intelligently which != frugality.
2. take this time to shuffle the team, get the righ and good people.
3. treat the layoffs fair and well, they will circulate you reputation further down the road for many years.
4. believe your vision, focus on dilievery and innovations, work quitely.

market will turn north as fast as turn south.

Good Luck to all hardworking and unfortunate people.
Jey 12/4/2012 | 7:34:57 PM
re: Atoga, Village Networks Scale Back lightbulb,

add an item in your recomments

5). (Atoga) NEVER releases HYPE message again to induced employee and VCs. Otherwise, they would hate you. Atoga must learn what is HONES.
Optics Mgmt 12/4/2012 | 7:34:57 PM
re: Atoga, Village Networks Scale Back Having worked at ATOGA and being one of the recent layoffs, some of what has been said is true and some is just BS.

It is true that there was some hype (or marketing)and as someone else said there has to be some of it. It is also true that all startups will not succeed. Jey (whoever he is) doesn't belong at startups, stay at established companies Jey.

What happened to ATOGA and probably Village is they released products before their time in order to get the hype going. I have been at startups in the past and you have to do this to a certain extent. Otherwise funding, interests by customers and future employees will not happen.

Both Village and ATOGA have been hit by market changes, the BLECs died and CLEC's and tier 1 carriers cap ex has dropped off. They are not interested in "God boxes" at this time. Maybe in a couple of years.

Having seen the tunable lasers myself, they indeed do work and are very slick. But the market isn't ready for them right now either.

In response to Jey's comments about buying off magazines, I have to say hogwash!! I have never seen or heard that ATOGA bought off magazines or awards. What ATOGA has is a great Marketing Cmmunications team and they can spin a story the best I have seen (besides Cisco). I am sure Lightreading, other magazines and award teams would take offense to the opinion that they can be bought off.

Thank you
let-there-be-light 12/4/2012 | 7:34:56 PM
re: Atoga, Village Networks Scale Back With all the troubles hitting the start-ups (primarily because they are start-ups f not for any other reason), maybe companies like LU might be in a good position after all.

Simply because when the temperature rises, it takes a longer time for a larger ice-block to melt away.

Nothing against start-ups per se...
mrtelecom 12/4/2012 | 7:34:56 PM
re: Atoga, Village Networks Scale Back Village had 200 employees a couple of months ago. Now they have 80. That is a 60 percent reduction according to what they say. Besides, trust me when I tell you that no more than 20-30 people remain. They got rid of all product managment, all software and most hardware. The company is done. So to you Mr. telephone get lost! You feel like a fool now that Lightreading has confirmed what I said.
dbostan 12/4/2012 | 7:34:55 PM
re: Atoga, Village Networks Scale Back Jey,
You should refrain from posting such messages, regardless of your frustration with Atoga.
I worked with Dr. Lowry at Atoga, and he is a very good and respectable optical specialist.
Besides, the entire team deserves credit for what it accomplished. The tunable lasers work fine, and the systems do what it what they were designed to do.
It is sad that the market evolved the way it did.
As one of the other guys said, it is not easy to work for start ups. If can not take it, don't do it!
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