IronBridge Networks Inc., a terabit router startup due to ship its first products next year, is busy working on its fourth round of funding (see Ironbridge Goes Virtual). But Alcatel SA (NYSE: ALA: Paris: CGEP:PA), which inherited its stake in the company’s second and third round through Newbridge Networks, will not continue its investment, according to several sources.

Although IronBridge officials downplay the Alcatel/Newbridge influence at this stage in the company's development, Newbridge was a major influence and brought IronBridge most of its cash. In fact, the three other investors in the company, Celtic House, the Ontario Teachers Pension Plan, and the Capital Communications CDPQ, a subsidiary of Canadian Pension Fund, were all introduced to Ironbridge through its connection with Canada-based Newbridge.

Ironbridge officials would not confirm that Alcatel is no longer investing in the company, but Doug Antaya, VP of marketing for the company, said that Alcatel’s absence from another round of funding would be a positive change.

“We’re hoping that they won’t continue the investment,” he insists. “It hurts our OEM prospects. Potential partners always wonder what Alcatel’s position is. I don’t blame them for asking.”

Ironbridge has already raised $85 million over three rounds. Antaya says that the Alcatel/Newbridge investment makes up less than 50 percent of the funding the company has received so far. (The glass is still half full!) He says Ironbridge has enough investors to get along just fine without Alcatel’s portion.

“We have plenty of other investors with very deep pockets,” he says.

Ironbridge engineers circulating resumes to other terabit routing companies have fueled the rumors of trouble at the startup. For example, Avici Systems Inc. (Nasdaq: AVCI; Frankfurt: BVC7), which, like Ironbridge, is based in Massachusetts, says it has recently received some applications.

But Antaya explains that what might seem like Ironbridge staff leaving could just be contract engineers, who recently finished a project, looking for work. Could be. Still, some in the industry wonder if this is a bad sign.

“You can’t say for certain, but once you start seeing people leave a startup you have to ask why,” says one source who didn’t want to be named.

With Alcatel’s own terabit router, the 7770, due to debut in the spring of 2001 -- on top of the fact that it is still reselling routers from Juniper Networks Inc. (Nasdaq: JNPR) -- Alcatel hasn't got much reason to continue their involvement with Ironbridge (see Alcatel Takes On Juniper).

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