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Optical/IP

Axiowave Stung by Rent

Trapped in a lease from the year 2000, Axiowave Networks Inc. now has a late rent payment added to its list of troubles.

The core router vendor has defaulted on the rent to its 100,000-square-foot facility in Marlborough, Mass., according to landlord Glenborough Realty Trust Inc. (NYSE: GLB). In a release earlier this month, the real estate group noted its quarterly earnings would take a $1.4 million hit, or 4 cents per share, due to Axiowave's default.

All Axiowave really needs is 30,000 square feet. But CEO Mukesh Chatter says the company is stuck paying for three times as much space at more than double the going rate. By his estimate, Axiowave could be occupying a space for $400,000 per year as opposed to its $2.9 million yearly rent bill to Glenborough.

The problem is that Axiowave was created during the dot-com bubble, when real estate prices were sky high.

"We were paying two-and-a-half times the market rate because the lease was [signed in] the year 2000 -- and they refused to negotiate," Chatter says. Glenborough, which claims to have initiated legal action against Axiowave, did not return calls for comment.

The imbroglio is interfering with Axiowave's attempts to secure new financing (see Headcount: Cutting the Fat (Really)). Already the company has cut employees to 25 from 156, but the albatross of that rent payment is keeping prospective investors away. "Investors demanded that rent be at market rate," Chatter says.

Founded by Chatter and Analog Devices Inc. (NYSE: ADI) chairman Ray Stata, Axiowave raised $120 million to develop its XCR128 core router (see Axiowave Queues in the Core). Unfortunately, the need for core routers has diminished since the company was founded in 2000, and the market is dominated by Cisco Systems Inc. (Nasdaq: CSCO) and Juniper Networks Inc. (Nasdaq: JNPR). And this year, each of them released a next-generation core router -- the CRS-1 and TX Matrix, respectively (see Cisco Unveils the HFR and Juniper Unveils the TX).

Avici Systems Inc. (Nasdaq: AVCI; Frankfurt: BVC7) remains in the low single digits of market share despite years of trying. Procket Networks was the next great hope among core-router startups, but the company faltered, and some of its technology and people wound up with Cisco (see Cisco to Pay $89M for Procket Assets).

Axiowave was the second Chatter-Stata attempt at a core router. The first, Nexabit Networks, was acquired by Lucent Technologies Inc. (NYSE: LU) in 1999 and eventually shuttered. Chatter left shortly after the acquisition to start Axiowave, reportedly taking some of the Nexabit staff with him (see Lucent Faces "Exodus of Nexabit Staff").

"We're just negotiating right now and exploring ways to restructure," Chatter says.

Glenborough isn't the only Axiowave creditor crying for attention. The MetroWest Daily News recently tracked down Axiowave's caterer, too. Craig's Catering of Northborough, Mass., claims it's owed $18,300 for seven weeks of delivering food to the nightshift, according to the MetroWest report.

— Craig "Not a Caterer" Matsumoto, Senior Editor, Light Reading




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toonces_has_the_car 12/5/2012 | 3:30:15 AM
re: Axiowave Stung by Rent Marconi bought the IP from Crescent. Most if not all of the employees went elsewhere.

Gotham went belly up 2 years ago. Claimed by God-box fever.

Laurel is one of the few that pulled themselves out of the mud.

Not really a startup, but Redback is trying to rise from the dead.

toonces
-------------------------
Those companies are long gone. Crescent is Marconi, Ennovate wasted alot of money and crapped out really badly with scrub mngt team, Allegro was bought. Gotham?

Who's left?
marete 12/5/2012 | 12:58:41 AM
re: Axiowave Stung by Rent
I visited Axiowave's website and it is gone. It looks like it is expensive to maintain it as well.
BLOSSOM 12/5/2012 | 12:58:40 AM
re: Axiowave Stung by Rent I think they moved into Bill & Dave's Shed!!
ATMRules 12/5/2012 | 12:58:40 AM
re: Axiowave Stung by Rent Stick a fork in'em, there done, have been done for a while....just end it already...please


ATMRules
cyber_techy 12/5/2012 | 12:58:39 AM
re: Axiowave Stung by Rent Chatter could be living there and sell his house.

Additional feature: Lots of parking for your holiday parties.
dmw_qqqq 12/5/2012 | 12:58:37 AM
re: Axiowave Stung by Rent Well Axiowave really got stuck in that sticky rent thing, actually the same situation is quite common here in Silicon Valley for lots of companies, enormous or tiny.

-dmW
Upside_again 12/5/2012 | 12:58:37 AM
re: Axiowave Stung by Rent Yet now they whine pubically like babies about rent that they negotiated? Looks like they're defaulting like trailer trash. Demonstrated once again, these are not good businessmen. If they did'nt think they were so smart and over-proud of themselves (thier reputation preceeds and follows them) they might have some decent respect and ablitly to negotiate. I guess no one trusts them and thier getting what they deserve.
opticalwatcher 12/5/2012 | 12:58:36 AM
re: Axiowave Stung by Rent Lots of companies paid peak rents (and peak salaries) in 2000 because demand was high and supply was low, and everyone 'knew' that the internet was growing exponentially, which meant unlimited sales and unlimited profits.

Now they have 100,000 sq ft for 25 employees.

Imagine 4000 sq ft cubicles!
sigint 12/5/2012 | 12:58:36 AM
re: Axiowave Stung by Rent Are companies required to lease properties for, like, a decade or something? Aren't 1 year or 2 year leases offered?

Thanks,
Sigint
dmw_qqqq 12/5/2012 | 12:58:35 AM
re: Axiowave Stung by Rent I guess even the office-hater-cubicle-lover Gordon Moore in INTEL would like a 4000 sq ft cubicle...meeeee tooooo

-dmW
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