Optical/IP Networks

Ellacoya Loses Sales VP

Ellacoya Networks Inc., one of a slew of startups targeting the IP service market, has confirmed that its vice president of sales, Bruce Skoletsky, left the company about four weeks ago. CEO Ron Sege, who joined Ellacoya in February, has assumed the role of managing regional sales executive, says a spokesperson (see Ellacoya Taps New CEO).

Skoletsky had previously worked for Ascend Communications and then Lucent Technologies Inc. (NYSE: LU) after it acquired Ascend in 1999. He had also worked for Nortel Networks Corp. (NYSE/Toronto: NT). Since leaving Ellacoya, he has been hired as vice president of strategic accounts for Unisphere Networks Inc. (Nasdaq: UNSP).

Losing the sales VP at this stage of development adds to the speculation that Ellacoya is struggling to deliver its product to carriers, say several sources familiar with the company. Originally, the sales team was told that the SGS44000 carrier-class platform would be in beta trials in late 2000. Now the company says it will begin trials in mid-April. These delays have dampened the mood at Ellacoya.

Michael Welts, vice president of marketing, contends that Skoletsky’s departure was a mutual decision, hinting that his departure wasn't universally viewed as a negative.

“Ron Sege has created a new environment here,” he says. “He’s driving us hard, and that’s not necessarily for everyone. This is a startup, and people have to decide if they want to live up to the challenge or if they should find something else. It’s not for everyone.”

Ellacoya and competitors such as CoSine Communications Inc. (Nasdaq: COSN), Celox Networks, and Gotham Networks are all struggling for sales in the middle of a carrier spending slowdown.

“It’s a really tough market right now,” says a sales manager from one of Ellacoya’s competitors, asking to remain unnamed. "What we do doesn’t play into the dial-up world. And the broadband buildout isn’t there yet. We’re proposing a new way of doing business, and a lot of carriers don’t understand it. I think all the players in the market are facing the same challenge."

In an environment in which raising new capital is extremely difficult, the challenge for startups such as Ellacoya is to deliver a product before the company burns through its existing cash. A venture capitalist familiar with the company estimates that Ellacoya's burn rate is $2 million to $3 million per month. Welts wouldn’t comment on the financials, but he says he isn’t worried.

“We just closed an $86 million round in December led by Goldman [Sachs],” he says. “We were one of the last companies out there to raise that kind of money.“

-- Marguerite Reardon, senior editor, Light Reading http://www.lightreading.com

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