Atrica Raises More Cash
Intel Capital, the investment arm of Intel Corp. (Nasdaq: INTC), joined its standing investors -- Accel Partners, Ascend Technology Ventures, Benchmark Capital, Innovacom (the venture capital subsidiary of France Telecom), Gemini Israel Fund, and St. Paul Venture Capital -- in the round. Israel's Challenge Fund also participated.
In February 2002, Atrica raised $75 million, bringing its total to $117 million (see Atrica Attracts $75M). Atrica CEO Vivek Ragavan said then that the cash would take the company to profitability.
Atrica officials say the company isn't profitable yet. Executives say they're using the additional $17 million as working capital to expand manufacturing facilities to meet growing demand for its products, especially in Asia.
Atrica has built a Layer 2 Ethernet switch specifically designed for carrier metro networks. It claims to have shipped more than 50,000 ports to customers in the second quarter of 2003, and it has announced four customers: France Telecom SA (NYSE: FTE), Al-Pi Telecomunicacions in Spain, Hokkaido Telecom Network (HOTnet) in Japan, and Broighter Networks Ltd. in Ireland (see Atrica Plugs Into France Telecom, Optimising Cost Control & Profitability in Telecoms, and Atrica Supplies Irish). It’s also rumored to be winning a big deal with Reliance Infocomm Ltd. in India (see Atrica Closes in on Indian Deal).
Michael Kennedy, managing partner at Network Strategy Partners LLC, says the new funding round may make it more difficult for Atrica to be acquired. The company has raised $128 million. Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA) bought Vivace Networks for only $135 million (see Tellabs Snags Vivace for $135M); Alcatel SA (NYSE: ALA; Paris: CGEP:PA) paid $150 million for TiMetra Networks (see Alcatel & TiMetra Seal the Deal); and Ciena Corp. (Nasdaq: CIEN) snagged WaveSmith Networks Inc. for $158 million (see Ciena Nabs WaveSmith).
“I was shocked to see that they are raising more money,” Kennedy says. “My guess is that they had to do it. A large partner or acquirer wasn’t available, so they needed to build out their manufacturing to fulfill orders. It would be easy if Alcatel bought them and handled that, but my guess is they weren’t available.”
However, Atrica's ability to keep attracting new investors signals that it is still convincing some that it can go it alone. The $500 million Intel Communications Fund has focused on investments in components and software companies with a few early-stage systems startup investments here and there. In the past seven months, it has only invested in two other later-stage startups aside from Atrica: Optical Solutions Inc. in December 2002 and Ikanos Communications Inc. in February 2003 (see Intel Invests in Optical Solutions and Optinel Adds Dragon).
Though the Intel/Atrica connection might seem strange at first glance, Michael Howard, co-founder and principal analyst at Infonetics Research Inc., says Intel has a lot to gain from the successful deployment of metro Ethernet. For example, it is one of the biggest manufacturers of Ethernet interface chips used on Ethernet switches and routers, not to mention the other chips it sells to Ethernet gear makers.
“Intel is supporting one of its customers with the hope it will become a bigger customer,” Howard says.
Intel officials aren’t as blunt about their interest in Atrica. Instead, they say that the company is looking to promote the entire ecosystem of Ethernet.
“In general we’re trying to enable the deployment of optical Ethernet,” says Gary Wiseman, marketing director for optical platforms at Intel. “We invested in Atrica in order for the company to speed up development of optical Ethernet solutions and bring them to the market more quickly.”
— Marguerite Reardon, Senior Editor, Light Reading