Optical/IP Networks

Is World Wide Packets up for Sale?

Is World Wide Packets Inc. preparing for a fire sale? This week the company, which is focused on providing 10-gigabit Ethernet switching in the metropolitan area network, laid off most of its marketing team, including the vice president of that group along with the vice president of sales.

So far, the list of casualties is a short one: only about seven employees out of approximately 200. But it isn’t the number that is troubling about these layoffs -- rather it's who has been laid off.

Octavio J. Morales, vice president of marketing, was let go along with two directors of marketing, Steve Thieme director of outbound marketing and Robin Thoth, director of marketing programs, along with three others in marketing and public relations. Only a few positions in marketing still remain, including a trade show and marketing coordinator and a customer marketing person. Those left behind will now report to Tom Johns, vice president of market development.

Bill Galvin, vice president of sales was also laid off on Monday, signaling to some left behind that more cuts in sales could be on the way. The company currently employs about 17 sales people worldwide. Eileen DeArmon, director of external affairs for World Wide Packets confirmed that layoffs had occurred, but she refused to discuss details. As for further cuts, she also wouldn’t comment on specifics.

“Everyone has been affected by the downturn,” says DeArmon. “We are making the rational decisions that are necessary to survive in this environment. We will continue to respond to the market and the requirements of our current business plan.”

Despite a spate of other startup layoffs recently, at least one worker from World Wide Packets says she was taken completely by surprise. She says that management had continually reassured employees during company meetings and in employee newsletters that the company was in fine fiscal fettle.

“They said that even though the market has been down, customers are still coming and investors were still very interested in us,” says Nancy Goodspeed, who was public relations manager for World Wide Packets before she was laid off on Monday. “Then on Monday Dave Curry [president] brought me into his office and the story completely changed. He said they were having a horrible time raising money and had to take drastic measures.”

World Wide Packets had raised an initial investor round of $20 million back in July of 2000 and a venture-backed round for $44 million in January 2001. With a $3 million-a-month burn rate, the company is fast approaching the end of its cash stream, say sources close to the company. Some have even speculated that World Wide Packets could be out of money by the end of October.

What’s next for World Wide Packets? Considering that marketing has almost been eliminated and the sales team has lost its vice president, it looks as though management is preparing to sell the company, say sources.

This would make sense, given its founders’ past experiences. Bernard Daines, co-founder, CEO, and CTO, has led two companies through acquisitions. First, he sold Grand Junction to Cisco Systems Inc. (Nasdaq: CSCO) back in 1995 for about $345 million; and then in 1998 he sold Packet Engines, a gigabit Ethernet switching company to Alcatel SA (NYSE: ALA; Paris: CGEP:PA) for $315 million. Alcatel has actually discontinued work on the Packet Engines project, and Daines has just settled a lawsuit with the company over issues associated with that acquisition (see Alcatel Settles with Daines). And Dave Curry, another founder and the president of the firm, sold his company, Architel, to Nortel Networks Corp. (NYSE/Toronto: NT) last year for $395 million.

But times are different now, and most large public companies aren’t interested even in fire sales. Nortel is definitely out of the acquisition game, given its most recent bloody earnings pre-announcement (see Nortel: Can This Company Be Saved?). Lucent Technologies Inc. (NYSE: LU) and Alcatel have also been struggling through the capital spending crunch and don’t appear to be looking to acquire startups at the moment.

That leaves Cisco, which has said it plans to start acquisitions again. But World Wide Packets is not a likely candidate given that Cisco has just rolled out a series of additions to its current routing product line to address the metro Ethernet market (see Cisco Storms the Metro Edge). What’s more, just this week it announced products specifically addressing the 10-gigabit Ethernet market for the metro, the same market World Wide Packets is targeting.

— Marguerite Reardon, Senior Editor, Light Reading
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Jimi 12/4/2012 | 7:46:18 PM
re: Is World Wide Packets up for Sale? This is the same form of death Zaffire took. Remember them? It's all over, except the crying. A self inflicting wound like ridding a chunk of marketing personel bellows out "Why market our stuff if our name won't be around to sell it?"

Sorry to see you go World Wide Packet.
vlui 12/4/2012 | 7:46:16 PM
re: Is World Wide Packets up for Sale? can someone comment on their solutions? I am aware that they have at most one customer (project) being deployed.
StartUpGuy1 12/4/2012 | 7:46:13 PM
re: Is World Wide Packets up for Sale? Their large box is OEM'd from Riverstone. Their small stuff is just a Layer 2 10/100 switch with VoIP on it. Nothing special.

Their whole deal is Layer 2. Bernard Daines can't spell "routing" and he is strictly a layer 2 guy.

What they do can be duplicated by any Gig Ethernet player.

Bernard is probably blaming everyone but himself for this failure.
DKP 12/4/2012 | 7:46:11 PM
re: Is World Wide Packets up for Sale?
You guys are nuts. WWP has one of the best focuses in the market. Ethernet is simple, yeah, but it will dominate the last mile. And if add to it solutions for VOIP and IP Video, you have a cheap voice, data, video solution. Don't get fixated on technology; it is product focus and customer value that wins today. Not some tunable-laser SONET/ATM/ETHERNET/DWDM god box; technology without customer value was the joke of the past five years. A plain old 1000 Mbps IP/Ethernet pipe can do everything for 1/10th the cost. Make the Ethernet platform support both full duplex point to point and PON, and this is a very cheap, powerful solution.

And big deal, they lay off 7 out of 200. I would like to find a company that has done less than that!

> THe whole deal is Layer 2

Isn't that great. So cheap, like a LAN switch.

hitecheer 12/4/2012 | 7:46:10 PM
re: Is World Wide Packets up for Sale? Agree, ethernet is probably going to be one of the solutions for last mile. The thing is what will make WWP score big if anyone can do it? How much IP do they have?

myhui 12/4/2012 | 7:46:08 PM
re: Is World Wide Packets up for Sale? Sure they have IP: it is the talent of the founder who can attract such a team of engineers and then use that to attract venture capital.

Building a long term franchise is the furthest thing from the founders' minds.
vlui 12/4/2012 | 7:46:07 PM
re: Is World Wide Packets up for Sale? A few of issues that I see are cost, its business model, and some future regulatory uncertainties in the last mile. I echo the comment earlier that if the boxes are so "off the shelf", L2, Ethernet, and etc., then anybody can do it. Their CPE device certainly dont come across as cheap, which is the ultimate benefit of Ethernet. i am not sure how the service providers would be able to justify this.

Along the same line, Bernard's dream obviously is to push all traffic - voice, data, and CATV - over the same pair of fiber to the home. It is ideal, and I would love to have that. But today and in the foreseeable future, we are not likely to see the same infrastructure shared by CATV and phone incumbents. It will require that, for instance, AT&T and a RBOC, AND any other CLECs/ISPs that's left to have an "exchange" point so that consumers would actually have a choice. And now they even have to share the same physical CPE (not sure how they share the cost). If i was Mr. AT&T, would I ever let my access equipment be sitting in the same room as Mr. SBC's? Whoever owns or services this last mile of fiber and WWP solution, how is it actually going to make money?? (even if you solve the ownership of fiber and hardware issue)

The market for a WWP solution obviously is new residential communities. Some home builders are more than happy to throw in the fiber, but if they only have fiber in the ground, ONE SINGLE INFRASTRUCTURE, no copper, no coax ... wouldn't they be waking up in the middle of the night wondering the new home owners would have a dial tone? A risky proposition for TODAY is my point.
lightmaster 12/4/2012 | 7:46:05 PM
re: Is World Wide Packets up for Sale? Perhaps someone is telling Bernhard that resistance is not "futile"?

rtfm 12/4/2012 | 7:46:04 PM
re: Is World Wide Packets up for Sale? I can't give many details here, but the WWP solution for the CPE *was* pretty darn cheap for what was being offered. However, it came down to business model issues. How was this too different from what others would/could offer?

Any such product (e.g., small municipalities oriented) needs LOTS of users for the company to eke out a profit. High volumes are needed.

This product was an attempt to find a middle ground between really dumb, cheap L2 devices (read home gateways) and vastly more expensive boxes that do full L3, management, QoS, etc.

I personally wonder how good/viable the WWP solution might have if all of the features would be available just with the CPE. The bigger box was nothing special, and actually a detriment to the whole solution. Such an "open" architecture/solution would probably require a CPE with more intelligence, or an aggregation box that others can and do offer.

Mr. Right 12/4/2012 | 7:46:03 PM
re: Is World Wide Packets up for Sale? Was there a "conspiracy" behind the resistance. Anyone see a pattern?
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