Corona Gets a Boost

Struggling edge router maker Corona Networks Inc. appears to have earned a second lease on life: It has won a key deal with Alcatel SA (NYSE: ALA; Paris: CGEP:PA) and some much needed financing in recent months, according to sources close to the company.

First, a bit of background: Corona was founded in 1998 and has raised more than $68 million to date from Merrill Lynch & Co. Inc., New Enterprise Associates (NEA), and others. The company announced its edge routing and IP services platform, the Corona IP Service Platform 12000, in January 2001, but it hasn't announced a customer to date.

In late 2002, hard times began to take their toll as the company reportedly tried to sell itself to Zhone Technologies Inc. -- a deal was never reached (see Headcount: Shopping, Lifting, Moving On). After being stung by a couple of rounds of layoffs, the company shut down for a few weeks at the end of 2002 and reopened as its investors continued to give it support (see Headcount: Happy Birthday!).

While no one's buying its edge routers, Alcatel has signed a contract for Corona to produce a hardware board that will plug into Alcatel's 7300 Advanced Services Access Manager (ASAM), one of the French equipment maker's DSLAM products. The board will "run the IP control plane software for IP packet routing, and a lot of other software such as L2TP [Layer 2 Tunneling Protocol], PPP [Point-to-Point Protocol], etc.," says one source. "Corona is doing the revised version of the ISM module."

Before Alcatel would put pen to paper, it wanted to know that Corona's investors would keep the company afloat -- and they chipped in on cue. According to sources close to Corona, the startup closed an $8 million Series D financing round from its existing investors and a deal with Alcatel was closed shortly thereafter. The contract was not announced publicly at the time.

Interestingly, a similar deal was almost struck between Alcatel and Redback Networks Inc. (Nasdaq: RBAK) in mid 2002. At least one Redback source claims that Corona's win, in this case, was Redback's loss (see Redback, Alcatel Close to Alliance).

Meanwhile, Corona's own service module technology is being redesigned by Wipro, an IT services consultancy, at a software development center the two companies set up in India. The original service module, which provides IP packet processing for access-side interfaces such as OC3 and DS3 connections, was using obsolete components and was expensive to produce and repair, according to one source.

So while Corona is building a new I/O module for Alcatel, someone else is building a new I/O module for Corona. Despite the circular nature of this deal, the bottom line is that Corona appears to have extended its life and may yet stay around long enough to convince its trial customers to buy its edge routing product.

Corona representatives couldn't be reached prior to this article's publication. Alcatel and Wipro have not yet responded to requests for comment.

— Phil Harvey, Senior Editor, Light Reading

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herbychicken 12/5/2012 | 12:12:22 AM
re: Corona Gets a Boost Is this the guy who was fired by that company Zaffire?
BobbyMax 12/5/2012 | 12:12:19 AM
re: Corona Gets a Boost The way Corona is stretching its life is rather curious and very suspicious. Its connection with Wunpro and Alcatel itself is very surprisung. Alcatel has been burnt by the acquisition Xylan, Packet Design, and Rockwell that got Krish Prabhu within the company. Alcatel is digging its own grave by getting its name associated with Corona.

It us also very curious that the VCs are burning their clientss money so that they make some commission.

As has been reported Corona did not have any customer so it wanted its name to be associated with Alcatel. There over 20 edge router vendors active in the same market space. In view of this there is very littele hope that any established career would buy from Corona.

It may take over a year before the I/O mudule can be fixed, if it can be fixed at all.

The Corona management does not have any experience either in technology or management.
CanMan 12/5/2012 | 12:12:13 AM
re: Corona Gets a Boost I dont understand what exactly Alcatel gets out of this other than the technology.
A partnership with CoSine would have made more sense. CoSins has 35+ customers now and a platform that is widely deployed.
Corona doesnt really have anything and Corona's technology doesnt seem that great.
firstmile 12/5/2012 | 12:12:06 AM
re: Corona Gets a Boost Where's the reference to Stanton? BTW...that's the guy.
firstmile 12/5/2012 | 12:12:05 AM
re: Corona Gets a Boost no argument from me.
USA 12/5/2012 | 12:12:05 AM
re: Corona Gets a Boost Lots of people were laid off from Zaffire, so what's the big deal.

Get over it will you.
firstmile 12/5/2012 | 12:12:04 AM
re: Corona Gets a Boost Anyone know where this deal was driven from within ALA? It seems odd for the world leader in DSL to tie up with Corona for development???
Almost unbelievable from my perspective.
sevenbrooks 12/5/2012 | 12:11:58 AM
re: Corona Gets a Boost
Why is it so inconceivable?

You have to imagine that Corona will do anything that Alcatel asks. That they will do so with a single-minded focus.

Cosine likely had its own ideas and has those pesky customers. One would guess that the Cosine team thus could not focus on what Alcatel wanted.

I do have a couple of questions...
1 - Does such a potentially one-sided relationship put Alcatel in "effective control" of Corona?
2 - Does one doubt that a potential "liquidity event" was part of this deal?

alcabash 12/5/2012 | 12:11:57 AM
re: Corona Gets a Boost Sorry to disappoint you but if you had worked at Alcatel you would know by now that these decisions are taken without any rationale basis.
firstmile 12/5/2012 | 12:11:57 AM
re: Corona Gets a Boost I think that it is inconceivable to have the all out market leader in ADSL make a public and strategic bet on a company that is not within the top 5 of their market sector. Why? If the motive is control, money can solve that problem. I'm just skeptical.
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