Entrisphere Nabs Siemens Exec

Who says things are sleepy in startup land? Telecom equipment startup Entrisphere Inc. announced this week that it has landed a $33 million funding round and a new CEO, former Siemens executive Mark Floyd. The two items are remarkable because, first of all, freshly funded telecom equipment plays are increasingly rare. Also, Floyd ranks highly in the industry, his last job being CEO of Siemens Information and Communications Network Inc. (ICN), a stint that ended before the ink on his business cards was dry.

That gives Entrisphere a big-name CEO to go along with a sizeable lump of cash from blue-chip investors. Though founded at the beginning of the telecom recession -- the year 2000 -- Entrisphere has raised $46 million in funding from several investors, including Accel Partners, Benchmark Capital, Capital Technologies CDPQ, Crosspoint Venture Partners, Duff Ackerman and Goodrich, and the much sought-after Ontario Teachers Pension Plan Board.

Entrisphere is keeping its product details a secret for now. However, Floyd generically describes the product as a "broadband multiservice access" box: "It converges voice, video, and data applications onto one platform and it fits seamlessly into large carrier, predominantly RBOC [regional Bell operating company], networks."

Unlike the data-only access equipment that was designed for greenfield carriers, Floyd says Entrisphere's box "takes into account existing [carrier] infrastructure and OSS systems." He says the box will work either in carrier central offices or in remote terminals.

The 78-person startup considers Alcatel SA (NYSE: ALA; Paris: CGEP:PA) its main competitor. "They're the global market leader in everything from DLCs [digital loop carriers] to DSLAMs [digital subscriber line access multiplexers]," Floyd says.

"There's a huge demand for T1s right now that a lot of carriers can't deploy enough T1s off their existing platforms," he contends, noting that incumbent equipment providers originally designed their gear to handle voice connections in the access networks, not data and voice. "Alcatel is stuck in a position of building new line cards that plug into their DSLAMs… but the problem is that the platform is out of gas and you can't scale it. You can stay with one platform too long."

Alcatel, of course, disagrees. Changing a line card is a heck of a lot easier than buying a whole new piece of gear. "The RBOCs have spent their money wisely with us because we can build scaleable networks," says Elvis Oxley, an Alcatel spokesman.

Oxley also took issue with Entrisphere's press release, which claims it's "the only company that is enabling incumbent carrier networks to offer advanced, converged services without disrupting current operations." (See Mark Floyd Lands at Entrisphere.)

"I don't know how they can legally say that," he says. "They may be the only one in their zip code, but that doesn't encompass a lot of other equipment vendors."

Besides a talent for riling his competition, Floyd brings to Entrisphere a background in managing data and voice equipment companies.

In 1993, Floyd founded Efficient Networks Inc., which Siemens acquired in April 2001 for $1.5 billion. Prior to that, he was chief operating officer of Networth Inc., an enterprise LAN equipment vendor. He helped take Networth public and, in 1995, helped sell the company to Compaq Computer Corp. for about $372 million in cash. Before that, Floyd was chief financial officer of Interphase Corp., another enterprise LAN equipment vendor.

His most recent management stint, however, only lasted four months. When Siemens bought Efficient, Floyd was made CEO of Siemens ICN. Floyd explains that Thomas Ganswindt took over as president of ICN after Roland Koch, the man who helped orchestrate the Efficient Networks deal, left in July 2000 (see Nortel to Grab Koch?).

"Thomas Ganswindt came in and he had a different idea of where he wanted to take the U.S. market," Floyd says. "We just amicably decided that, being the new guy on the block, he should just put his own guy in there and I should go and do something else."

Even while the telecom equipment sector is the last place many executives would want to be right now, Floyd says he's eager to get to work with Entrisphere. He's also cutting down his outside commitments; recently he stepped down from the board of Occam Networks Inc. (OTC: OCCM). He remains on the boards of Sychip, Carrier Access Corp., and Strix Systems Inc., but adds that he will likely trim down that list in the next few weeks.

While Floyd is looking forward to getting back to work, he's aware the odds are against him.

"While I was associated with two VC firms, I've looked at a ton of companies and I've walked away shaking my head, saying, 'Who's going to buy this equipment?' There are about 300 optical and optical component companies out there and, at the end of the day, I would say that maybe 20 percent of them survive in the next two to five years."

Entrisphere, he thinks, will be one of the survivors: "From the technical team to the market and positioning, I don't think there's a better company out there in the telecom equipment space."

— Phil Harvey, Senior Editor, Light Reading
lastofthebohicans 12/4/2012 | 9:46:39 PM
re: Entrisphere Nabs Siemens Exec Does anyone know what the difference is?
Don't see any Tier 1 VCs here, either
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