Kestrel Quietly Reconfigures

Kestrel Solutions Inc., an optical networking company building products with FDM (frequency-division multiplexing) technology, looks to be changing its focus. Sources close to the company confirmed yesterday that it had laid off about 120 of its employees last Thursday in an effort to clean house and further slim down operations.

Kestrel executives are keeping their lips sealed regarding the layoffs. Alan Schwartz Ocio, vice president and general counsel for Kestrel, said the company wouldn’t comment or give out any details about its status until it finishes the acquisition of TeON, a small optical transport company that Kestrel agreed to buy for an undisclosed amount on June 13th (see Kestrel to Acquire TeON).

Buried at the bottom of the press release announcing the TeON acquisition, Kestrel also threw in another surprise. Brian Jervis, president and chief executive officer of Kestrel, and John Barter, chief financial officer, had left the company. Marty Kaplan, TeON’s CEO and the former chief technology officer for Sprint Corp. (NYSE: FON), was named Kestrel’s interim CEO.

The layoffs, the shift in top management, and the merger all indicate a major reconfiguration at the company.

Last week’s layoff is the second one for the company in the past two months. At the end of May, it announced it was reducing its workforce by 16 percent in order to cut costs (see Kestrel Announces Layoffs). Back then, many of the casualties were contract workers, but this time the layoff included most of the marketing team, including Amar Senan, vice president of business development and marketing.

Following the first layoff, the company canceled plans to open a facility in Ottawa, supposedly nixing another 19 people who would be employed at that location, says one source. Then in June, it suddenly announced plans to acquire TeON, a small seven-person concern affiliated with Milcom Technologies Inc., a company that markets technology developed by the military for commercial use.

Strangely enough, Milcom is also an investor in Kestrel’s key competitor Centerpoint Broadband Technologies Inc., which has also been developing an FDM-based product that supposedly handles transmission rates up to 40 Gbit/s. But Matt Bigge, president of Milcom Ventures says he sees no conflict among any of these companies.

“Their [Kestrel and Centerpoint] initial product ideas were headed in the same direction way back,” he says. “But from what I’ve seen lately, Centerpoint has moved in the direction of integrated communications with its wireless division. Kestrel has been more focused on the metro loop.”

FDM technology crams multiple streams of traffic into a single optical wavelength. This is in contrast to the more pervasive DWDM (dense wavelength-division mulitplexing) technology, which crams multiple wavelengths into a single optical fiber strand. The technologies are not necessarily competitive, as they are used for different applications.

A year ago, Kestrel seemed to be living the venture-capital dream. It had raised over $187 million and was targeting incumbent metropolitan area carriers, mainly the RBOCs, with FDM technology that was supposed to allow them to use existing fiber to transmit traffic at speeds up to 10 Gbit/s, something that couldn’t be done with existing TDM/Sonet technology. What’s more SBC Communications Inc. (NYSE: SBC), one of the largest RBOCs in the country, had agreed to test Kestrel’s products.

But FDM may be a technology in search of a problem, says Scott Clavenna, president of PointEast Research LLC and director of research at Light Reading.

Instead of using time slots to multiplex traffic over several wavelengths like traditional time-division multiplexing (TDM) and Sonet technology, FDM uses different frequencies on one wavelength to carry traffic. Because FDM minimizes dispersion at high data rates, it can be used to transmit traffic at speeds up to 10 Gbit/s over any grade of fiber. This is different from TDM, which can only transmit traffic at high speeds over high-quality fiber.

The idea behind Kestrel’s solution is that RBOCs, which already have fiber installed in the ground, could use its gear to provide high-speed services over fiber that otherwise would not be able to support TDM-based OC192 transmission.

But there are a few problems with this solution. For one, 10-Gbit/s OC192 technology hasn’t seen the quick uptake that Kestrel and Centerpoint had hoped for. Additionally, traditional Sonet implementations handle traffic at speeds of OC48 (2.5 Gbit/s) and below well enough on existing fiber, that there’s really no need for the FDM solution right now, says Clavenna.

And the fact that the cost of fiber continues to drop at a rate of about 60 percent a year, while there is currently a glut of dark fiber, means technologies that maximize dark fiber are relatively unnecessary.

“A year or two ago everyone assumed there would be this massive need for bandwidth in these networks,” says Clavenna. “But it’s not true. You can get fiber pretty cheaply now, and you can get a Cerent [Cisco] box with OC48 interfaces to build a high-capacity network relatively inexpensively.”

- Marguerite Reardon, Senior Editor, Light Reading

MrBurns 12/4/2012 | 8:05:45 PM
re: Kestrel Quietly Reconfigures Absolutely unreal the way this company refuses to make any public announcement regarding the latest RIF - and the even more interesting news unmentioned anywhere: they have lost (or discarded) their COB, Mel Gafner. He was one of the orig. founders and an integral component in Kestrel obtaining the record funding they have now pissed away. Inside the company there is virtually the same lack of any official communication, and the pep talk that Marty Kaplan gave the troops on the "Black Friday" after the last RIF is starting to ring VERY hollow. Many dedicated and talented folks remain, the product continues to perform flawlessly in the field, and there is nothing but good news from the SBC front - yet most now feel Kestrel is quickly becoming FUBAR. Add to this the retention of several VP's most feel were to blame for the lack of execution - and perhaps worse - the main purveyors of misinformation that contributed to the companyGÇÖs problems, and confidence in management is just shattered. The only real visible activity now seems to revolve around HR (incredibly unaffected at all by the recent RIF's), and they have been deadly silent on EVERYTHING. My continued read on this "acquisition" of TeON is that it appears more likely to be the reverse. How can the investors sit idly by and let the company remain silent? Or is it that they are the only ones in the loop on KestrelGÇÖs plans? The remaining employees certainly are not. MB
dmurphy 12/4/2012 | 8:07:06 PM
re: Kestrel Quietly Reconfigures Some factoids:

1) There are white papers on Kestrel's website (http://www.kestrelsolutions.co... that describe optical FDM in some detail.

2) Kestrel publicly claims span lengths of up to 70km w/o amplification, and has released test results from a trial involving high PMD fiber at those distances.

3) Kestrel has demonstrated its ability to send a 10Gig OFDM signal down a DWDM lambda normally used for a 2.5Gig SONET, and supports a variety of ITU grid frequencies.

4) Kestrel has announced availability of circuit packs supporting a number of non-SONET signals, to enable "fiber mining" in RBOC networks.

gea 12/4/2012 | 8:07:22 PM
re: Kestrel Quietly Reconfigures Well, I wouldn't call myself an EXPERT, but it would seem reasonable to me that FDM would suffer from limitations equivalent to QPSK and QAM modulated signals, as are common formats in the CATV industry. These typically have higher receiver sensitivity values, and need more linear OFAs.
So whatever the distance limitations of those signals are, I bet FDM is somehwat more limited, because of the higher data rates involved.
In other words, it's probably a pretty good technology for some metro networks.
candlelight 12/4/2012 | 8:07:28 PM
re: Kestrel Quietly Reconfigures In all the articles that I have come across on Optical FDM, I have not found any comment on how far can Optical FDM transmit. Also no one has mentioned about the effects of non-linear optical modulation on optical subcarrier multiplexing techniques. Is this technique scalable to 40 Gbps?
I know a startup working on 20Gbps based on Optical FDM.

In my opinion this technique will perform well only for short distances because of:

1. Non-linear crosstalk introduced by non-linear
optical modulation.
2. Non-linear crosstalk introduced by the Fiber.

The idea of being able to bypass SONET and multiplex different frame formats on same carrier is very attractive. But is the optical technology really mature enough to support it?

Experts Please Comment
gea 12/4/2012 | 8:07:41 PM
re: Kestrel Quietly Reconfigures FDM is basically subcarrier modulation. What this means is that within a 'single' optical frequency, many signals are simultaneously being modulated onto the same optical carrier using different RF frequencies, very similar to the CATV industry. in other words, one single takes up, say, 50MHz to 100MHz, another signal takes up 100MHz to 150MHz, and so on. These are all placed onto a single optical wavelength. Theoretically, this same trick could be done again on a different wavelength, and then this wavelength (with others) could be optically multiplexed with others onto one fiber via WDM.

With FDM, they have a clever way to place what are normally baseband signals (ie, OC-3/12/48) and which normally hog an entire wavelength, onto different RF carriers. This allows multiple signals to share a single wavelength, without the constrictions placed by SONET and normal TDM.
lightmaster 12/4/2012 | 8:07:42 PM
re: Kestrel Quietly Reconfigures Gardner,

Your confusion comes from the terminology "one wavelength". There is no such thing as an exact wavelength. Just like a single musical note consists of a center frequency and harmonics, an optical signal consists of multiple signals distributed around a center frequency in a relatively predictable pattern.

I assume that Kestrel is doing something similar to sub-carrier modulation, where they attempt to use different parts of the signal to carry unique information.

gardner 12/4/2012 | 8:07:44 PM
re: Kestrel Quietly Reconfigures Could someone please explain what people are trying to say when they say: "putting multiple frequencies on one wavelength"? Obviously it is an abuse of language since in reality wavelength and frequency are related by the equation lambda = c/f. Are we really talking about wave bands, much like the way the shortwave spectrum is divided into the 41m band, the 21m band, etc?
spectre 12/4/2012 | 8:07:44 PM
re: Kestrel Quietly Reconfigures Well, at least the silence is finally broken, but there are a few things that need to be summed up:

1) Marty Caplan IS the CEO.....not interim.
2) Supposedly the entire acquisition was through stock.
3) The marketing team was hit, but the article failed to mention the fact that almost all of operations and many from engineering were let go also.

After reading this article, it makes me kind of wish that I had been laid off with everyone else.
gea 12/4/2012 | 8:07:44 PM
re: Kestrel Quietly Reconfigures Both you guys and Kestrel kind of missed the point on FDM. "More bandwidth" isn't really it's best feature. The most interesting thing about FDM, O-CDMA or other similar technologies is that it is not necessary to go through SONET in order to mux different signal types onto one wavelength. This (greatly) increases the level of optical transparency in an FDM network.

I've seen Kestrel bill itself as being kind of a replacement to WDM, but this really obscured the advantage of that technology (and there's no reason it can't be used in conjunction with WDM). WDM is also questionable in some cases in the metro 'cause if you have plenty of fiber, its often cheaper to use different fibers rather than WDM. FDM uses a single laser operating in a sort of analog-mode, which makes it potentially attractive (and cheaper) for packing up a single wavelength with all sorts of stuff that doesn't pack easily into SONET.

Granted, its kind of a niche product (I'm not sure you can easily amplify it), but for multiservice metro networks it could be a very useful tool.
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