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Optical/IP

Lucent Ditches Chromatis

Lucent Technologies Inc. (NYSE: LU) has confirmed the closure of Chromatis Networks, the wavelength-division multiplexing startup it purchased in May 2000 for $4.5 billion (see Lucent Catches Chromatis).

The closure involves the layoff of about 150 employees, Lucent says. Most of these are R&D folk located at Chromatis's former headquarters in Petah Tikva, Israel, but a handful of engineers also have been let go at Lucent facilities in Herndon, Va. The company hasn't said whether any closure of buildings or offices will accompany the layoffs.

Lucent plans to discontinue its line of Metropolis MSX gear, which came from Chromatis. The company's other DWDM and next-generation Sonet platforms will continue to be sold under the Metropolis brand.

"This is part of our Phase II restructuring effort. We're resetting our priorities and making difficult decisions in order to focus our efforts on our largest service-provider customers," says Lucent spokesman Frank Briamonte.

The world's largest carriers are still buying telecom products despite the slowdown, but they weren't buying the Chromatis products, Briamonte says.

The news has been greeted by investors as yet another step in the right direction for Lucent, which in the past few weeks has managed to rework its credit agreements, launch a successful bond offer, and garner cautiously positive ratings from influential analysts (see Levy's Lucent Call Boosts Stock, Lucent Boosted by Bond Offering, and Lucent Breaks Through on Covenants). As this went to press, Lucent's shares were trading at $7.48, up 0.15 (2.05%).

Today's news is no surprise to anyone familiar with the long, sad saga of the Lucent/Chromatis relationship. Indeed, the deal has become a textbook example of how mergers and acquisitions were misguided and mismanaged under the executive team led by ousted CEO Rich McGinn.

A variety of sources say Lucent's biggest misstep wasn't buying Chromatis, which already had a metro WDM product ready to hand. The trouble arose when Lucent tried to integrate the box with in-house gear -- and with another recently acquired metro box from Ignitus Communications LLC (see Lucent Ignites ATM).

Months later, the integration effort had yielded little more than questions, arguments, and even lawsuits (see Tales of Lucent: Readers Respond and Lucent, Chromatis & Ignitus: A True Tale?). After awhile, Lucent quietly put the brakes on the Ignitus effort and seemed intent on making a go of the Chromatis wares.

But to little avail. Lucent had already lost significant ground in the metro market, and by early 2001 Lucent folded its Metropolitan Optical Networking unit back into the overall Optical Networking division. Bob Barron, the former CEO of Chromatis, left Lucent in April (see Lucent Metro Boss Leaves) and appears to be heading into a new job soon (see LightCross Taps Former Chromatis CEO).

Other Chromatis veterans say they have no regrets. "It is a very unfortunate situation, but the bottom line is that I understand Lucent's decision from a business perspective," says Doug Green, former VP of marketing at Chromatis and presently VP of marketing at Ocular Networks Inc. "Lucent is trying to restructure to be more efficient, and they had in Chromatis a standalone, single product laboratory in Israel."

He says one could argue a lot of reasons why the Chromatis product never took off, including the many Lucent reorganizations that took place during the product's tenure, as well as Chromatis's dependency on multiple technologies: "The market is moving away from 'god boxes' and the Chromatis product certainly depended a lot on the value of integrating DWDM, ATM, and TDM."

Lucent says it's holding onto the intellectual property it acquired with Chromatis and has no plans to sell it at this point.

— Mary Jander, Senior Editor, Light Reading
http://www.lightreading.com
happyone 12/4/2012 | 7:37:28 PM
re: Lucent Ditches Chromatis Not only did their customer get screwed, their employees and the vendors got screwed.

Litigious societies breed people like the current President, who shall remain nameless. The nameless one decided to go after former employees for trying to make a living after Neptec folded (right!).

I for one am waiting for the other shoe to drop on this new incarnation. I will be patient for the President to meet his just rewards.

opticalc 12/4/2012 | 7:51:17 PM
re: Lucent Ditches Chromatis Consider it as a donation of 4.5 Billion to Israel.
lightmaster 12/4/2012 | 7:52:25 PM
re: Lucent Ditches Chromatis
"So why would Alidian and Astral more likely to fail???"

IMO, there are a lot of product reasons I could list, but the obvious problem is that these two companies have been around since before Chromatis and still have not gone anywhere with their products. What VC in their right mind would continue to give them $$$ when they have each spent $100M without getting anywhere?

Then again, there are plenty of VCs that aren't in their right mind. They'll both probably announce new funding shortly ;)
whoknowsnothing 12/4/2012 | 7:52:26 PM
re: Lucent Ditches Chromatis So why would Alidian and Astral more likely to fail???
my2cents 12/4/2012 | 7:52:44 PM
re: Lucent Ditches Chromatis While some of these companies will clearly not make it, however having zero revenue does not mean that they all are worthless.

Cisco would have appeared on such a list a year or two after its founding, and the VCs know that.

=================================================
It's interesting to get the Silicon Valley (i.e., no carrier experience) take on the supplier market. What are the combined revenues of these companies? Zero?


Chromatis
Alidian
Astral
Mahi
Atoga
Astral
Gotham
Ocular
Mahi
lightmaster 12/4/2012 | 7:52:44 PM
re: Lucent Ditches Chromatis Flanker,

Your point about companies with no carrier experience in general may be valid, but you have not done your homework on the companies you listed. Get your facts straight if you want them to support your thesis. Based on 1. Silicon Valley 2. No carrier experience :

Chromatis: wrong on both counts: based in Israel, the R&D team was led by individuals from ECI telecom.

Alidian: Right on both points

Astral: Based in Boston, carrier experience from the datacom side (Cascade), which is probably just as bad a no carrier experience if you are selling transport equipment (Tried to use ATM for TDM applications).

Mahi: Silicon valley, correct. But lots of carrier experience from AFC, and largely financed in their second round by carriers.

Atoga: Right on both points

Gotham: (see Astral, ditto). May succeed in selling to the datacom side as an ATM switch replacement if they get the software right.

Ocular: Located in Northern Viginia, leaders from Bell Labs, Alcatel, Tellabs, Ciena.

I do agree with your point in general. In fact, the two with the most carrier experience, Mahi and Ocular, are two I would watch closely over the next 6 months.

lightmaster 12/4/2012 | 7:52:44 PM
re: Lucent Ditches Chromatis my2cnets said: "While some of these companies will clearly not make it, however having zero revenue does not mean that they all are worthless."

IMO, the two companies on the list who have reported some revenue (Astral and Alidian) are lowest on the list in terms of "likely to succeed".
flanker 12/4/2012 | 7:52:51 PM
re: Lucent Ditches Chromatis "Also why the broad brush on Silicon Valley?"

A lot of money went into firms with little or no revenues. Secondly, the mentality that 'we know better than the ILECs' is trademark Sandhill Road.
Were these not the same VCs who going to conquer the world 18 months ago? Finally, someone else on this thread has already said that the carriers are not listening anymore. There is no 'god box' business model.

There is such a thing as service differentiation.

Finally, I've worked both funds and start ups, and the arrogance that was bred during the NASDAQ run up did not serve anyone well. The VCs showed they were more interested in shifting early stage company risk to the public markets than they were in building real companies.


sonet49er 12/4/2012 | 7:52:52 PM
re: Lucent Ditches Chromatis Why are Astral & Mahi listed twice?

Also why the broad brush on Silicon Valley?
I can maybe see why you would not know that Petaluma, CA is not part of Silicon Valley but Chromatis had headquarters in Herndon, VA & a research facility in Tel Aviv. Astral Point is based in Chelmsford, MA & Gotham Networks is based in Acton, MA.
flanker 12/4/2012 | 7:52:54 PM
re: Lucent Ditches Chromatis It's interesting to get the Silicon Valley (i.e., no carrier experience) take on the supplier market. What are the combined revenues of these companies? Zero?


Chromatis
Alidian
Astral
Mahi
Atoga
Astral
Gotham
Ocular
Mahi
Infinity 12/4/2012 | 7:53:06 PM
re: Lucent Ditches Chromatis Did anybody know some news about Lucent's intention to closed their fab in Nuremburg?
gladysnight 12/4/2012 | 7:53:08 PM
re: Lucent Ditches Chromatis Does the industry really think that all packet services should be mapped to circuit networks?
-fiber_or_us
---------------------------

Fiber, baby! What do you think a wavelength is?

It doesn't really matter at what layer or granularity you consider the problem, the problem remains essentially the same.

i.e. if you map a packet service to a DS0 in the PSTN, or you map a packet service to a VC4 in an SDH/SONet network or if you map a packet service to a 40Gbps wavelength in an "all-optical" network.

You still have QoS and economic challenges to meet. You still need to service your customers different traffic types appropriately while stuffing the circuit sufficiently to make a profit on what it costs you.

Ivory tower discussions of possible technologies are all very well and good, but the ones that win will be the ones that best meet these twin (and opposing) challenges. I don't have my crystal ball plugged in at the moment, so I'm unable to tell you exactly which these will be.

Ask me in 10 years or so, I should have it sorted by then . . . .
whoknowsnothing 12/4/2012 | 7:53:14 PM
re: Lucent Ditches Chromatis that is precisely the point. since there is internal issues, it would be fun to tear it down and rebuild new, provided it is profitable ofcourse to the share holders and provides longterm competitiveness.
lightmaster 12/4/2012 | 7:53:16 PM
re: Lucent Ditches Chromatis Building a god-box based carrier (the "god carrier") who merges the IP network with the transport network, might not be the great idea you immagine. Might there be real issues that keep the large carriers from merging their IP and transport networks?

Why don't the same people who build cars build roads? After all, the purpose of roads is to carry cars, right?

I have a boat and a car. Why not merge them into one so it can be more efficient?

Why don't the airlines just train the same people as flight attendants and pilots so they can intermix them and be more efficient?






whoknowsnothing 12/4/2012 | 7:53:18 PM
re: Lucent Ditches Chromatis So, I must now find a company who does all that, plus packet level forwarding control and "grooming".....

But back to earlier comments about all inclusive all can do god boxes runs into carriers's internal organization walls....

It is a shame if true, but not surprising. I guess it would be fun to reorganize and run such comapanies. Although I have no such experience, but I would love to manage such a change and get out.....

let me see the want ad for a new CEO...COO....
lightmaster 12/4/2012 | 7:53:23 PM
re: Lucent Ditches Chromatis fiber_or_us said:

"While Ciena/Lightera(CoreDirector) has been succesfull in sorting out the provisioning problems in the SONET/TDM space, it has in no major way impacted the need for routers and packet switches."

I agree. My list of companies is dealing with the optical transport/switching part of the network, not the packet level. Many believe that these levels are collapsing, and someday maybe they will, but my crystal ball says they will stay seperate for quite a few years, not for technical reasons but for pragmatic reasons. I think that routers and the transport network will COMMUNICATE more closely than they have in the past, such as through an optical UNI or perhaps even better signalling to the SONET network.

So, I could come up with a similar list of companies who would make a great end-to-end layer-2/3 network, such as Cisco, Extreme, Redback (just the SMS part)...
lightmaster 12/4/2012 | 7:53:36 PM
re: Lucent Ditches Chromatis fiber_or_us,

I understand your point in theory, but in practice it means I should have bet on Cisco/Montery instead of Ciena/Lightera.

The business question is not SHOULD data get mapped onto circuits, but WILL it be. I do believe that the migration will occur over time, and in some places sooner than later, but I have to feed my kids and put them through college in the next few years.
mike buzz 12/4/2012 | 7:53:40 PM
re: Lucent Ditches Chromatis Neptec Inc. of Tenn. filed bankruptcy recently and took many companies for a ride ( 200+ co's for more than 5Mil + )
I would like to know if anyone else out there was screwed to ????????

There assets ( paid for or not ) were purchased by thew Spencer Trask Group and they reorganized under
Neptec Optical Solutions Inc. They never even skipped a beat, they were at a trade show while they were going thru bankruptcy????????

What the F&(*^$% K

Our company was totally screwed by them any others ???????


Later
lightmaster 12/4/2012 | 7:53:41 PM
re: Lucent Ditches Chromatis I would want it to cover both the transport elements and switching elements. I would start with Ciena as they have the market lead in both long haul transport and OXC. To compliment the transport side, bring on ONI for metro transport (Ciena claims they're catching up with the Metro product, but we'll have to see). For access all the way to the building, I have seen no great optical solutions yet as they are all too expensive. Perhaps Luminous? On the switching side Ocular provide VT level cross connect to compliment the CoreDirector.
whoknowsnothing 12/4/2012 | 7:53:44 PM
re: Lucent Ditches Chromatis A hypothetical question.

Which companies would you like to see combined to form a one stop shop for access to long haul... A comapany great at everything, but not necessary the best in every field.
lightmaster 12/4/2012 | 7:53:45 PM
re: Lucent Ditches Chromatis First, Red Herring evaluates companies purely based on valuations and Wall Steet connections. All of their intelligent reporters left to go to some sort of online optical publication called Light Reading.

Back in the days of "IPO then figure out what you're doing", perhaps Red Herring's method was valid. I don't put much stock in it today.

Axiowave won't deliver product into trials until mid next year, so how knows?

Inara came out of Roshnee after it self destructed. About the time of the Red Herring article, they brought in a new CEO, Steve Pearse, who left Cyras a few months before Ciena bought them for $2 Billion. The new management has an impressive pedegree, but the company basically hit the "reset" button earlier this year and went back under the radar.
whoknowsnothing 12/4/2012 | 7:53:48 PM
re: Lucent Ditches Chromatis lightmaster,
thanks for the info.

Red Herring featured Axiowave Networks(MA) and Inara(CA).

What have you heard about them???

Packet rings, do you mean RPR??? like Luminous?

whoknowsnothing.
lightmaster 12/4/2012 | 7:53:49 PM
re: Lucent Ditches Chromatis I would seperate the multi-service platforms into two categories. First are the true "god boxes", ones that still claim they will replace everyting from ONI's DWDM equipment to Juniper routers. Second are the groups that may have started out sounding similar but are more focused once the covers came off. This is not an exhaustive list and is only based on my interpretation of public info:

First, the true gods...

Chromatis
Alidian
Astral (original 5000)
Mahi (one theory)
Atoga - the ultimate god that integrates everyting from tunable lasers to SONET to layer 3 routing and even per user APPLICATION aware routing. If they pull this off AND find someone to sell it to we should all bow down..

More focused:

Astral (the new 7000, still slideware) that is mainly an STS cross connect
Gotham (mainly cascade 500 replacement)
Ocular (VT/STS cross connect plus Ethernet over SONET)
Mahi (Second theory that they are focused on CoreDirector market)

Then there are the packet ring vendors who say they will do everyting over Ethernet rings, too endless to list...





whoknowsnothing 12/4/2012 | 7:53:49 PM
re: Lucent Ditches Chromatis No one is buying, but who has the cash remaining from budgets? who needs to be considering network improvements???

I see lots of new vendors in beta trials with big name carriers and service providers... I wonder when will these successful tests result into actual orders?

I never did take a customer, any traditional RBOC/ILEC perspective on potential ownership issues within their organization. I would have thought the corporate top down pressure for cost savings would force "transport" and "data" folks to pick up at least some of these new start ups?

Which vendors do you consider to be the "god box" suppliers?
questionable 12/4/2012 | 7:53:50 PM
re: Lucent Ditches Chromatis DMX ?
AllSpectra ?
lightmaster 12/4/2012 | 7:53:51 PM
re: Lucent Ditches Chromatis Lucent claims to have other products that can fill in the holes left by the Chromatis product. Is anyone here familiar with what they are?
lightmaster 12/4/2012 | 7:53:51 PM
re: Lucent Ditches Chromatis In case nobody has noticed, nobody is buying ANYTHING new right now. That means that we probably won't find out who the winners are (with a few exceptions) until we see where the 2002 capital budget gets spent in Q1.

The big boys are interested still, but in things that save capex, not so much in experimental technology. It takes a while for the equipment market to reset.
lightmaster 12/4/2012 | 7:53:52 PM
re: Lucent Ditches Chromatis From what I hear on the street about Mahi, it's a similar story to the previous thread, i.e. positioned as doing everything, but in early stages very focused somewhere in the optical cross connect space, possibly as a CoreDirector competitor.
ZAPPED 12/4/2012 | 7:53:54 PM
re: Lucent Ditches Chromatis As far as God Boxes are concerned, nobody has been able to deliver yet. Lot's of promises, but what about sales? I thought the Greenfield market was almost dead at least for the rest of the year.
The big boys have no interest. From what I've seen, nobody has anything the ILEC's are interested in. Santera just got a huge boost in financing, but they said they would have internet offload by July??? Where is it? Tachion tanked from lack of interest and financing. Sonus Networks managed to go public and make money on the deal, and they have internet offload and a good tandem switch (with customers) albeit in a couple of pieces, but I don't see them anywhere near a voice or class 5 switch? And you talk about a God Box? Am I off base here, let me know
sanddune 12/4/2012 | 7:53:55 PM
re: Lucent Ditches Chromatis
Hopefully folks at Mahi are following
this discussion. They are next in the
queue for a god-box. Which is supposed
to include really every thing in it.
stuartb 12/4/2012 | 7:53:56 PM
re: Lucent Ditches Chromatis Agreed, real customers with real deployments are quite possibly the only thing that can truly eliminate the god-box label. Last time I checked, Ocular is still absent one. Until then, your remark will continue to strike me as awkward.

Regards -Stu
dpgreen 12/4/2012 | 7:53:59 PM
re: Lucent Ditches Chromatis Stuartb,

Your skepticism is healthy, and your points are actually insitefull. Ocular did choose to focus on certain applications to get away from the train wreck in the MSPP market, but it was early in the process by design (look at the backgrounds of the executive team). Marketing messages are intentionally broad in the beginning to introduce the company without telling competitors what you are doing.

You may continue your healthy skepticism until the customer votes are in. That's all that matters after all.
litehearted 12/4/2012 | 7:54:01 PM
re: Lucent Ditches Chromatis dpgreen,

You touched on some very important reasons why "god box" manufacturers have not been really successful. If "god boxes" are "developed" to cross the wrong type of domains, they run into political and organizational trouble. I personally was involved in addressing this issue with various customers. Invariably, there was a discussion of who owned what. The transport organization did not want to own a switch fabric and the data organization did not want to own a SONET mux.

In theory, the idea of "god boxes" techincally appears to be a good idea, especially for "greenfield" service providers. In practice, it creates huge obstacle selling hurdles and customer confusion. How many "greenfield" SPs are left that can actually pay for these boxes. The numbers dwindle daily.

IMHO
stuartb 12/4/2012 | 7:54:01 PM
re: Lucent Ditches Chromatis I agree that God-box is an inherently relative concept -- the fact is that vertical integration is probably the second biggest factor driving technology evolution behind higher processing speeds. God-box is really more of an affliction on those who, in their quest for the holy grail (pun also intended), don't manage to figure out the right balance in as far as the product arhitecture is concerned(HW, SW and silicon).

With all due respect then, I guess I'm simply calling "bluff" on your marketing strategy. It's clear, I hope to most, that you are trying to reposition Ocular as a Tellabs competitor in an attempt to distance yourself from the many NG-SONET Cerent chasers out there. Up until "Oculars latest annoncement" which you spoke of below, Ocular clearly positioned itself as a best-in-breed MSPP, comparing itself directly to Cerent and claiming superiority through improved multiservice/multifunction integration.

Those claims immediately raised the possibility of the "god-box dilemma" afflicting Ocular. Just because you've now chosen to concentrate on one or two particular services and functions from a marketing standpoint doesn't change that fact.

-Stu
donethat 12/4/2012 | 7:54:03 PM
re: Lucent Ditches Chromatis ..Of the $5B acquisition, I really have to wonder how much Lucent thinks the IP is worth?? Is the value knowing what doesn't work??
dpgreen 12/4/2012 | 7:54:03 PM
re: Lucent Ditches Chromatis Stuartb,

You certianly raise a valid question.

Without arguing religion (i.e. terminology, pun intended) of what is and is not a "god box", the real question is what level of integration is good and what is bad. SONET itself was an integration of stand alone muxes, FOTS, and protection switches. Frame Relay and ATM were succesfully integrated. Those were examples of appropriate integtration.

What I would call bad (a "god box" in my terminology) is a product that either incorporates too many functions and is not good at any particular one, or a box that incorporates functions that cross too many organizational and cultural boundaries within the customer so that it has no clear value proposition to any single buying entity.

Chromatis, along with all of their contemporaries, pitched the integration itself as the main value proposition, which played well witih startup CLECs. They had trouble, however, displacing application specific equipment in one-on-one comparisons. It's like the high school athlete who is all-state at 5 sports, but not good enough to make the pros at any.

If you read Oculars latest announcements (covered in Light Reading), they focus very clearly on cross connect, SONET, and ethernet transport. Ocular makes the case in one on one comparisons with traditional 3/1 DCS equipment: 1/3 the cost, 1/20th the space, 1/10th the power for EQUIVALENT function.

Integration plays a role as it did in SONET, but you have to have a stand alone business case to displace existing technology in specific applications.
johnjohn 12/4/2012 | 7:54:05 PM
re: Lucent Ditches Chromatis as a result of the mishandling of this acquisition, lucent lost some much needed infusion of entreprenuerial spirit that barron brought to the table. combine that with the fact that jeong kim is gone and lucent is becoming stale at the top ranks
tiredofit 12/4/2012 | 7:54:05 PM
re: Lucent Ditches Chromatis My LU stock isn't looking like a very good deal is it?

And it hasn't for about a year. You just wake up Rip Van Winkle?
ivehadit 12/4/2012 | 7:54:08 PM
re: Lucent Ditches Chromatis i forgot to add: an excellently researched article. it had its facts right.
ivehadit 12/4/2012 | 7:54:08 PM
re: Lucent Ditches Chromatis integrating atm, tdm, and dwdm. that says cost, cost, cost.

there's no atm in metro, no god-box dwdm requirement. seems like the wrong product for the times.

stuartb 12/4/2012 | 7:54:09 PM
re: Lucent Ditches Chromatis Doug Green from seems to be shooting himself in the foot with his quote:

"The market is moving away from 'god boxes' and the Chromatis product certainly depended a lot on the value of integrating DWDM, ATM, and TDM."

It looks to me as if the Ocular product is attempting to integrate DWDM, ATM, TDM and IP...a Zeus to Chromatis' Apollo.

-Stu
Twistall 12/4/2012 | 7:54:11 PM
re: Lucent Ditches Chromatis A variety of sources say Lucent's biggest misstep wasn't buying Chromatis, which already had a metro WDM product ready to hand. The trouble arose when Lucent tried to integrate the box with in-house gear

If by "ready to hand" one means "designed without manufacturing in mind" and "will run given a large staff of software engineers standing by to patch over the hiccups" then the article is correct.

And as far as integration with in-house gear goes, I don't think they ever got that far.

Bottom line: Lucent bought Chromatis thinking it had a product ready for customer trials, and apparently, it wasn't.
lmtis 12/4/2012 | 7:54:12 PM
re: Lucent Ditches Chromatis Spend $4.75B, can your competing product lines, and then can Chromatis. My LU stock isn't looking like a very good deal is it?
The Carmack 12/4/2012 | 7:54:13 PM
re: Lucent Ditches Chromatis Today's news is no surprise to anyone familiar with the long, sad saga of the Lucent/Chromatis relationship. Indeed, the deal has become a textbook example of how mergers and acquisitions were misguided and mismanaged under the executive team led by ousted CEO Rich McGinn.

OUCH!!!
Dr. Joe 12/5/2012 | 12:13:34 AM
re: Lucent Ditches Chromatis Dear Mike:

Neptec should be investigated by the Attorney General's Offices of Texas, New York, California, and Tennesse concerning thier unfair business pratices and theft of trade secrets.

This company can not be trusted and when will the customers, suppliers, and investment firms wake up to these type of behaviors.

They are the Enrons of the Fiber Optic Market.

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