Ex-Lucent Group Starts Anew

A group of ex-Lucent employees has found new life in the form of a startup called Internet Photonics Inc.. The company, which officially came out of stealth mode today and announced that it has raised $31 million in two rounds of financing (see Optical Ethernet Startup Launches), first began as a division of Lucent Technologies Inc.'s (NYSE: LU) optical group.

But the story of Internet Photonics is really the story of a clash between internal product development and Lucent's acquisitions.

It all started back in the Spring of 2000. Lucent had just announced the biggest acquisition of its history, acquiring Chromatis Networks for $4.5 billion. The company was working on a transport platform that combined dense wavelength-division multiplexing (DWDM), time-division multiplexing (TDM), and asynchronous transfer mode (ATM) into one box. At the same time Lucent had just completed spinning in another startup, Ignitus, which also had an ATM-based DWDM platform (see Lucent Ignites ATM).

Meanwhile, at Lucent's Research division, Bell Laboratories, Martin Nuss, the director of the optical data networks research department, was leading a group of engineers in the development of yet another metro transport product. Unlike the technology of the two startups that Lucent had just bought, Nuss’s group was developing an optical transport platform focused specifically on the transport of Ethernet traffic.

After the Chromatis deal was signed and sealed, Lucent was thrown into a state of chaos. In August of 2000, the company announced a massive restructuring of its optical group, breaking it into two parts: an optical division headed up by Jeong Kim and a metropolitan area group headed up by Chromatis’s ex-CEO Bob Barron (see Lucent Shakes Up Optical Group).

As work progressed on the three main metro optical initiatives, it became clear that Lucent had a big problem on its hands. It had too many products with similar functionality.

“There were a lot uncoordinated initiatives in the company, and some poorly thought out decisions were made,” says Gregory Koss, president and CEO of Internet Photonics. “The business environment was very different back then. Their decisions seemed more reactionary.”

Lucent decided to officially combine the technologies of Chromatis and Ignitus. This left the metro Ethernet transport project in the lurch. With Lucent’s full support, Nuss, the Ethernet group’s leader, left to found Internet Photonics.

The company’s initial $12 million round of funding, which closed last October, and its latest round of $19 million, which closed just last week, were both led by the Sprout Group, the venture capital affiliate of Credit Suisse First Boston. AT&T Corp. (NYSE: T), which is also a technology partner, along with several smaller investors, also took equity in the company. Lucent has an equity interest in Internet Photonics stemming from technology transfer at the spinoff. From the beginning Internet Photonics has licensed some of its core technology from Lucent. But Lucent has not, infused any cash into the company.

“To Lucent’s credit, Jeong Kim saw the merit of our technology,” says Koss. “But also to his credit, he let us know that it would be hard to get commercial interest within Lucent right after the Chromatis deal. It made more sense for them to let the technology go than to stifle this group.”

Lucent, which reorganized its optical division and then reorganized it again six months later, eventually canned both the Chromatis and Ignitus projects. All told, the company spent roughly $5 billion on two startups with little to show for their efforts (see Lucent, Chromatis & Ignitus: A True Tale? and Lucent Ditches Chromatis).

Meanwhile, Internet Photonics has worked quietly out of the spotlight building its company. Currently, it has 105 employees, most of whom are engineers. It has also filed several patents for its technology. The company has not released details of its product, but Koss says it will allow pure Ethernet transport over DWDM to coexist with already installed Sonet rings in the same network.

At the same time, the market has shifted away from ATM-based boxes like those that Chromatis and Ignitus were developing. Optical Ethernet is now the buzz. Still, Lucent seems to be sticking to its guns and expresses little regret over letting Internet Photonics go.

“I don’t see the technology of Chromatis and Internet Photonics as similar,” says Wendy Zajack, spokeswoman for Lucent. “When Lucent purchased Chromatis, a multiservice box was what the market was demanding. Now things are different and we’ve had to look at our portfolio and streamline our strategy. That’s meant refocusing our products and discontinuing some to fit the new needs of the market.

"We fully support the efforts of the folks at Internet Photonics,” she continues. "And we plan to work with them as we would with any other startup."

Internet Photonics is about to enter beta tests with an unnamed carrier in the next few weeks, says Koss. And it plans to release more detailed product information in the first quarter of next year. It will likely be going head to head with incumbent providers like Nortel Networks Corp. (NYSE/Toronto: NT), ONI Systems Inc. (Nasdaq: ONIS), and Ciena Corp. (Nasdaq: CIEN).

— Marguerite Reardon, Senior Editor, Light Reading
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HarveyMudd 12/4/2012 | 7:26:28 PM
re: Ex-Lucent Group Starts Anew The 10 Gbps Ethernet over DWDM is certainly a good technokogy that would be in demand. Using POS (Packet over Sonet,m the ethernet frames can be mapped into the Sonet frames.

Most certainly all acquisitions were bogus but Chromayis and Ascend caused the downfall of Lucent. Lucent is not likely to recover for many decades. However, it would continue to function in spite very low stock evaluation. The fate of Lucent would be the same as that of xEROX cORPORATION WHICH CONTINUES TO FUNCTION IN SPITE OF VERY LOW STOCK EVALUATION.
spont 12/4/2012 | 7:26:27 PM
re: Ex-Lucent Group Starts Anew labotamy! That's a funny one...
Fhunton 12/4/2012 | 7:26:27 PM
re: Ex-Lucent Group Starts Anew Harvey,

Been reading a few of your very "informed" messages over the last while, and while you obviously are a Lucent employee, and put everyother competitors equipment, technology etc down, you cant spell mate!!!

You're shouting off on this Lucent this, Lucent that....but you're a bad rep of the company with consistent typos and it just reflects who you are.

Anyway, in response to another "informed" comment of yours "Chromayis and Ascend caused the downfall of Lucent.", being an employee of Ascend, things here were absolutely fantastic until Lucent came along, Ascend was the company to work in, lots of money around, happy workforce,nice atmosphere, now since Lucent came, it's dull, dreary, bureacratic and not life in the workforce.

I think anyone in the industry would agree with me on that one,especially ex-Ascend and i'm sure the same is for Chromatis aswell.

If you ever want to see and example of a young, profitable, dynamic company being brought to it's knees, look at the Lucent/Ascend takeover.


P.S. Harvey, you spelt Chromatis wrong aswell mate, i'd advise spell checker, dictionary or a labotamy.......!
Lucky 12/4/2012 | 7:26:25 PM
re: Ex-Lucent Group Starts Anew you talk about energetic company, why do not you talk about the corruption and un-ethical issues that Ascend and its employees were an expert at . Ascend folks brought Lucent down, because Lucent did not understood the culture of unethical company. Lots of money!!!!! where did it come from.
nag_e_n 12/4/2012 | 7:26:24 PM
re: Ex-Lucent Group Starts Anew Can we stick on that DWDM and EOS.That will be better and neutral
Fhunton 12/4/2012 | 7:26:23 PM
re: Ex-Lucent Group Starts Anew ask yourself why Lucent bought Ascend and who's business model do you see Lucent "trying" to get to?............i really dont see how Ascend brought Lucent down?....anyway that's i the past and this is now...so lets move swiftly along...
fleet_line 12/4/2012 | 7:26:15 PM
re: Ex-Lucent Group Starts Anew Anyone care to take as stab at how they "allow pure Ethernet transport over DWDM to coexist with already installed Sonet rings in the same network"??
rlander 12/4/2012 | 7:26:15 PM
re: Ex-Lucent Group Starts Anew Don't know how they do it, but one could certainly move the SONET signals onto specific DWDM wavelengths and the native gigE on other wavelengths on the same fiber ring. The two protocols would not have anything to do with each other except to share the same fiber.

lightmaster 12/4/2012 | 7:26:13 PM
re: Ex-Lucent Group Starts Anew "...one could certainly move the SONET signals onto specific DWDM wavelengths..."

Nobody knows how but them, but this has been claimed before.

All of the ATM VP ring vendors claimed you could do this via a 1310/1550 coupler. The theory was that the existing SONET ran on 1310 while the ATM ring ran on 1550. DWDM ring vendors also can do this by running the SONET on one of the DWDM ring channels. I suspect that these guys have a similar story.

All of these schemes are feasible in theory, but all show a research mentality and a total disregard to how RBOCs manage their networks. NOBODY is going to take down an existing SONET ring running live traffic to install couplers at every SONET node, or to move existing SONET nodes onto a wavelength, unless there is an extreme circumstance. Taking down live traffic is a no-no. The systems, if installed at all, will be run on seperate fibers.

Also, the largest issues aren't with getting traffic on the same fiber as SONET, they are with operational integration (management systems, etc.) Once again, they seem to be taking a research view of the problem.

The company seems to have some smart people, but the techies are all either from pure research at Lucent (not product development) or product development from enterprise vendors. I believe that the CEO Koss comes from a company called Sonoma, who had the wonderful idea of building boxes for carrier networks out of PCs.
kd2000 12/4/2012 | 7:26:04 PM
re: Ex-Lucent Group Starts Anew To me Lucent/Ascend merger was total
scam..which top management did for
their personal benefits.. and screwed
all the shareholders - (24b with lot of cash
to top management)
Ascend switches had started to crack and ATM
had reached it peak with law of diminishing returns... with POS picking up from Juniper..

It is hard to let it go when you
own quite a bit of Lucent stock...

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