& cplSiteName &

IPOptical Races the Clock

Light Reading
News Analysis
Light Reading
6/28/2001

IPOptical Inc., the core routing startup that took on Alcatel SA (NYSE: ALA; Paris: CGEP:PA) in court and settled with the French equipment giant back in December, is running out of time as it seeks its second round of funding (see Alcatel Settles Suit for a Chunk of Startup).

Sources close to the company say the company is close to running out of cash and is preparing to close its doors.

Sasmith Reddi, director of technical marketing for IPOptical, said today that those predictions are premature. He says the company expects to close a $20 million to $30 million round of funding sometime in the next two weeks.

“Shutting down might be the case later on,” he says. “But at this point we are looking at multiple investment opportunities. The current market conditions aren’t making it easy, though.”

The company got off to a rough start in the spring of 2000. In June, Alex Mondrus, IPOptical’s chairman and chief executive officer, was sued by Alcatel (see Alcatel Sues Former Employee and Alcatel's Former Employee Fights Back). Mondrus had been an engineer at Alcatel working on the 770 Routing Core Platform, its core routing project, before he started IPOptical. Alcatel accused him of stealing product plans and poaching key engineers from Alcatel to come work for him prior to the company’s launch. Despite the six-month legal battle, the company was able to raise $8 million in its first round of funding in October 2000 from Amp Capital Partners and Agilent Technologies Inc. (NYSE: A), based on a $30 million valuation.

Recently, the company, which says it is developing a scaleable routing system to rival those of other companies like Avici Systems Inc. (Nasdaq: AVCI; Frankfurt: BVC7) and Pluris Inc., seemed to be gaining momentum. The company named two prominent service provider executives to its board of directors: Kevin Boyne, former chief operating officer of UUNet, and Mike O’Dell, senior vice president and chief scientist of UUNet (see O'Dell Joins IPOptical Board). And it had ramped up its staff to about 90 employees.

But Reddi acknowledges that the company is halfway through its development stage and in desperate need of a cash infusion. When asked how much longer the company could survive on its current funds, Reddi said he couldn’t comment.

“It’s hard for everyone right now. VCs have to work out their own issues. We’re still looking for a lead investor. But we don’t expect we’ll have to lower our valuation.”

That may be the problem. VCs surveyed by Light Reading in the past month say that nearly every company seeking funding this year has been forced to take a "down round," in which their current round of investment comes in at a lower valuation than the last one. And entrepreneurs who fight this trend risk not getting any money at all.

As Reddi retains optimistic that the VCs will pull through with the cash, the company also has significant challenges in addition to funding, considering the current state of the core router market. Just look at Juniper Networks Inc. (Nasdaq: JNPR), considered a leader of the market along with Cisco Systems Inc. Juniper, which had been the darling of Wall Street for cracking into the core routing market and taking market share from Cisco, recently announced it will miss its sales targets for this quarter, and it has lowered its guidance for the next few quarters (see Core Slowdown Hits Juniper). This miss, along with disappointing results from Cisco, is a good indication that growth in the core routing market is slowing.

What’s more, building core routers is not easy by any stretch of the imagination. Many companies have tried and failed miserably. Nexabit, Ironbridge, and Netcore are the names of a few startups that attempted to build core terabit routers and that were either acquired (Nexabit by Lucent Technologies Inc.; Netcore by Tellabs Inc.) or shut down altogether (Ironbridge). Nortel Networks Corp. (NYSE/Toronto: NT) just announced this week that it's slashing development of its core router (see Nortel 'Rightsizes' Terabit Router).

- Marguerite Reardon, Senior Editor, Light Reading
http://www.lightreading.com

(13)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
Page 1 / 2   >   >>
froggy
froggy
12/4/2012 | 8:09:44 PM
re: IPOptical Races the Clock
1- Weak executive management team
2- No innovative technology
3- No vision

Result : Chapter 11

SPARKLE
SPARKLE
12/4/2012 | 8:09:44 PM
re: IPOptical Races the Clock
To invest in what? Something Alcatel has already determined they own?

Sources close to us say that people are ALREADY leaving! What crap, $20 to $30 million from who?

Next on the hook will be Ocular (God willing...)
coolhand
coolhand
12/4/2012 | 8:09:41 PM
re: IPOptical Races the Clock
IpOptical ---> Word is the folks are on the street. Shut down Tuesday - paid through Friday.

Never a fun time for the folks in the company....

Say Sparkle, whats this stuff re; Ocular?

C
skeptic
skeptic
12/4/2012 | 8:09:40 PM
re: IPOptical Races the Clock

How to fail:

1) Put an engineer in as CEO. Better yet, pick
one from a company that has never built an
IP-anything successfully.

2) Agree to a settlement that will make it
impossible to raise money in the future.

3) Make sure that you have no unique vision,
no technology and no story beyond "we want to
build a router".


Anyone know why some of the uunet people were
interested in such a weak company?
singularity
singularity
12/4/2012 | 8:09:18 PM
re: IPOptical Races the Clock
I'm one of the former employees. I joined the
company specifically because The CEO was an
engineer. We had a very simple concept: build
a BIG core router. We had a very simple hardware
design. We had a very simple software concept.
We had a very simple business plan. There was
absolutely no need for a anything else except for
customers. Any technical "unique vision" would require a longer development cycle. IPOptical's unique vision is (was? will be?) stunningly simple: use available software, available hardware, and a simple architecture. This let's you build a product that is likely to work and deliver it at least six months earlier than the competition. The customers do not want elegance: they want a reliable, usable, scalable router.
We were executing our plan. It is not Alex's fault that all (ten or so) potential customers no longer believe they need a terabit router in the time frame the company needed to attract a second round.
isis chicken
isis chicken
12/4/2012 | 8:09:14 PM
re: IPOptical Races the Clock
I guess uunet were (and still) searching for new router because they didn't by any chance wanted to use your company (juniper) 's
router.

I don't need to explain their reasons, but the facts is like you said -
they prefered this company on yours, what a shame to JUNIPER !!!
LightCycle
LightCycle
12/4/2012 | 8:09:12 PM
re: IPOptical Races the Clock
> I guess uunet were (and still) searching for new
> router because they didn't by any chance wanted to
> use your company (juniper) 's router.

Eh?

UUNet DOES use Junipers. Someone got their wires crossed?
Belzebutt
Belzebutt
12/4/2012 | 8:09:12 PM
re: IPOptical Races the Clock
"Mondrus had been an engineer at Alcatel working on the 770 Routing Core Platform, its core routing project, before he started IPOptical. Alcatel accused him of stealing product plans and poaching key engineers from Alcatel to come work for him prior to the companyGÇÖs launch."

Does anyone else predict an OPC-like future for the 770?
skeptic
skeptic
12/4/2012 | 8:09:11 PM
re: IPOptical Races the Clock
I guess uunet were (and still) searching for new router because they didn't by any chance wanted to use your company (juniper) 's
router.

I don't need to explain their reasons, but the facts is like you said -
they prefered this company on yours, what a shame to JUNIPER !!!
-----------------------

In the way of explaination, this has nothing
to do with IP optical. The above message has
to do with Charlotte networks core router retest
and many more of the same sorts of posts can
be found in the messages on that subject.







SPARKLE
SPARKLE
12/4/2012 | 8:09:07 PM
re: IPOptical Races the Clock
Ocular:

Stalled trying to spin second box because of slow sales of first, multiple cards in-process, uncompleted, rumor has it...
Page 1 / 2   >   >>
Featured Video
Upcoming Live Events
October 22, 2019, Los Angeles, CA
November 5, 2019, London, England
November 7, 2019, London, UK
November 14, 2019, Maritim Hotel, Berlin
December 3-5, 2019, Vienna, Austria
December 3, 2019, New York, New York
March 16-18, 2020, Embassy Suites, Denver, Colorado
May 18-20, 2020, Irving Convention Center, Dallas, TX
All Upcoming Live Events