Is Celox Farewell an Omen?

Celox Networks, an IP service switch startup, closed its doors for good this week. Yesterday, the company took down its Website and posted a message for all to see:

    “We regret to announce that as of December 18, 2002, Celox Networks has suspended operations and has begun the process of permanently closing the business. It had become increasingly clear that carrier CapEx spending would not return in the foreseeable future. As a result, we could not reasonably expect to execute on our business plan.”

The company burned through a total of $155 million of venture funding in roughly four years to create its SCx 192, an IP switch with an 80-Gbit/s backplane that the startup claimed could support OC192 packet processing and six million simultaneous users (see Celox Bags $80M Funding Round).

For a while, Alcatel SA (NYSE: ALA; Paris: CGEP:PA) was rumored to be interested in the SCx 192, but in the end nothing materialized. And although the switch made it to the AT&T Corp. (NYSE: T) labs, trials never generated any meaningful revenue. Celox also hoped to land a big contract with the U.S. federal government to build out a secure IP network, say sources, but the bidding process was extremely slow. With no other real prospects in the pipeline for the next six to 12 months, the venture capitalists backing the company were unable to continue funding.

Celox wound up laying off approximately 125 people in its Southborough, Mass., facility. It closed its development site in St. Louis this summer, laying off 90 people (see Meet Me in Southborough, MA?). “Celox is a case of simply dying on the vine, within eyeshot of a rising river,” says Scott Clavenna, president of PointEast Research LLC and director of research at Light Reading.

But some analysts say that Celox’s market was simply doomed. They say the need for IP service switches is waning, as much of the functionality is becoming incorporated into existing edge routing platforms. Cisco Systems Inc. (Nasdaq: CSCO) and Juniper Networks Inc. (Nasdaq: JNPR), for instance, have released various versions of software to create IP VPNs, aggregate traffic, and enable other IP services (see Edge Routing Gets Service Friendly ).

“There aren’t too many IP networks out there that don’t have Cisco routers in them,” says Curtis Price, an analyst with Stratecast Partners. “It’s much easier to upgrade what you already have than to deploy something completely new. Carriers are looking to cut operational costs and squeeze as much as they can out of what they have.”

Other startups targeting the IP service market have been struggling, as well. Corona Networks Inc., which makes an IP edge aggregation device, also recently laid off a large number of employees and is rumored to be on its last legs (see Headcount: Shopping, Lifting, Moving On). Ellacoya Networks Inc., which first marketed itself as a broadband aggregation and IP services company, completely changed its strategy and is now targeting the cable market with a smaller box focused on bandwidth policing (see Startup Renaissance in Cable Market).

Larger, public companies are also struggling in this market. Lucent Technologies Inc. (NYSE: LU) recently cancelled its SpringTide product (see Lucent Silences SpringTide). CoSine Communications Inc. (Nasdaq: COSN), which specializes in offering network-based VPN and firewall services, only reported $5 million in revenue for the third quarter of 2002 (see CoSine's Quest for Cash). Nortel Networks Corp. (NYSE/Toronto: NT) is still selling its Shasta product, though analysts speculate it isn't selling a lot of them.

Bert Whyte, director and CEO of Network Equipment Technologies Inc. (net.com) (NYSE: NWK), says carriers have been interested in service creation, but that most of the Scream boxes his company sells are for ATM and Broadband Remote Access Server (B-RAS) functionality.

“The reality is that no one is buying anything,” he says. “They are very interested in service creation, but I don't think they'll be deploying it until 2004.”

— Marguerite Reardon, Senior Editor, Light Reading
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glad2Bgone 12/5/2012 | 12:56:12 AM
re: Is Celox Farewell an Omen? RIP Celox - 300 casualties

I wonder who will pick the bones?
atogas_dead 12/5/2012 | 12:55:13 AM
re: Is Celox Farewell an Omen? Well, nothing left but the crying I guess....

Atoga has gone into receivership and its creditors have brought in the hatchet crew to slice and dice. Board of directors was dissolved before Christmas and the remaining employees had to take off the last 2 weeks of December without pay while the new "management" team came up with a restructuring plan.

Today it was announced that the new plan calls for most of the employees to be taken around the back of the building and summarily shot. They were given the following package:
-- 1 days severance (no kidding, today is their severance)
-- Option to buy Cobra insurance (until they close down for good)
-- 401k roll-over (like this is something special)
-- 90 days to exercise their worthless stock (most likely granted at $.10 to $.30, now worth $.00)

Those that were asked to stay do so at 50% salary (following an earlier 10% reduction) and no guarentee that they will in fact get paid. Sounds like the ones terminated came out better on the deal.

LR - better put in a call quick to validate... Tomorrow the PBX is listed on Comdisco's site. If you hurry you might be able to find the "Most Promising New Public Network Technology Introduced at SUPERCOMM 2001 Optical Networking Winner: ATOGA Systems Inc" on Ebay.
cyber_techy 12/5/2012 | 12:54:21 AM
re: Is Celox Farewell an Omen? Celox was actively advertising new positions less than 2 weeks before closing.

Job Summary
Job Number: 886265

Job Title: Routing Protocol SWE

Company Job ID:

Company: Celox Networks, Inc.

Location: US - MA, Southborough

Job Start/End Date: not provided

Job Type: Permanent

Job Classification : Full Time

Hours/Week: 40 hrs/week

Salary Range: not provided

Education: Bachelors Degree

Required Degree/
Formal Training: not provided

Required Licenses/
Certificates : not provided

Experience: Entry Level (0 - 2 years)

Homepage: not provided

More Information

America's Career InfoNet has information about jobs at the national level:

General Outlook on the U.S. Job Market
Additional Career Resources
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Profile of Massachusetts

Job Description

The Routing Protocol SWE (Job # 0208SBO131) will be part of a team responsible for the design, development, testing, and maintenance of SNMP protocol software for a high-performance network system.

Job Requirements/Skills/Experience:
This job requires 0-1 years of relevant experience in the areas of SNMP, OSPF, or IPSec software development. Experience in embedded systems programming is essential Knowledge of one or more of the following protocols is essential: SNMP v1/v2/v3 or other Network Management tools.

The individual should have strong programming and debugging skills in C/C++ in a Unix and/or embedded software environment.

The individual must be able to work in a team environment. Develop large portions of software independently and rapidly. Work across organizational and geographic boundaries to deliver quality software to market in a timely manner.

BSCS or appropriate experience.

To apply please reference Job #0208SBO131:

Human Resources
Celox Networks
2 Park Central Dr.
Southborough, MA 01772
FAX: 508-305-7004
EMAIL: [email protected]

dm4089 12/5/2012 | 12:54:14 AM
re: Is Celox Farewell an Omen? OOOH, OOOH, OOOH!

One of those part-time (40 hours / week) jobs a Celox. I always wanted one of those. Is it too late to apply?
Peter Heywood 12/4/2012 | 9:08:49 PM
re: Is Celox Farewell an Omen? One of the things I've heard about these types of boxes is that they're incredibly hard to configure - so hard that they're not really a practical proposition for carriers.

gigeguy 12/4/2012 | 9:08:46 PM
re: Is Celox Farewell an Omen? > One of the things I've heard about these types of boxes is that they're incredibly hard to configure - so hard that they're not really a practical proposition for carriers. Comments?

That's typically a vendor-by-vendor issue rather than something that can be generalized across the board. Those vendors that succeed often do so by delivering their products complete with provisioning and other management tools, either in an NMS or as an adjunct to the CLI.
BobbyMax 12/4/2012 | 9:08:44 PM
re: Is Celox Farewell an Omen? There are many vendors that have IP Service Switch. The worst thing for the investor is that Celox did not disclose honestly about its business prospects. The Celox management only decided to close the company as it did not receive any additional funding.

Some wild animals have to destroyed as their population growth cannot be supported by the resources. The same thing is happening with respect to IP switches, IP Aggregation Devices, and Routers. This phenomenon leads to company closures and consolidations. The vendors of these equipment think that thge customers would buy every month. The world has never seen this kind of mushrooming growth inspired by VC funds.

rainbowarrior 12/4/2012 | 9:08:44 PM
re: Is Celox Farewell an Omen?
What a suprise! A negative post from BobbyMax.

From what I've heard about Celox, they had a good, solid product based on a powerful, working ASIC design. They set out to provide basic "smaller, denser, faster" functionality and they succeeded. Only problem is that market fell away from them.

No company is perfect, but this is the kind of company that could have provided real value to the industry if it lasted through the telecom depression.

I'm sorry to see it pass away.
Scott Clavenna 12/4/2012 | 9:08:43 PM
re: Is Celox Farewell an Omen? Hard to say if Celox is characteristic of the whole IP Service switch market. That market has many applications and aspects: VPN service, security services, "IP-enabled-Frame," and broadband aggregation, among others. Services like IP-enabled-Frame are very real within the large IXCs and require scalability going forward that incumbent suppliers may not be able to supply.

I think Celox had a product that could wear many of these hats well, and was addressing a real need in the market; they are a victim primarily of a market slowdown, not a market rejection, per se. Timing is everything in Big Iron investments, and a change in plans from large carriers as to when they roll out advanced IP services or scale their existing L2 services with MPLS has dramatic impact on venture-backed startups. But it doesn't necessarily mean the idea is flawed.

On tough to configure, that is definitely going to be an issue as carriers move to L3 service infrastructures, with any-to-any kind of connectivity supplanting classic hub-and-spoke, connection-oriented L2 services. All vendors will have to step up to that challenge.

Managed security services are going to be hell, I would assume. Configuration complexities being just the beginning.

FISH 12/4/2012 | 9:08:42 PM
re: Is Celox Farewell an Omen? What about Atoga ?
Is this a good product ?
Do you think they will make it ?
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