Mahi Secrets Surface

Details about stealthy startup Mahi Networks Inc. are starting to surface. The company, which is building a multiservice provisioning platform (MSPP), is rumored to be close to signing a deal with a large RBOC. And it seems that one key to the startup's potential success could be in its partnership with semiconductor giant, PMC-Sierra Inc. (Nasdaq: PMCS).

Here's the scoop: Mahi, which anonymous sources say had a valuation of about $250 million after its $65 million second round of funding last June, is rumored to have a contract with BellSouth Corp. (NYSE: BLS) to develop its Mi7 optical transport switch router. If Mahi delivers the goods, the contract will be worth more than $300 million worth of business, sources say.

"This would make sense," says Dave Gross an analyst with Communications Industry Researchers Inc. He says that several people working at Mahi have strong ties with Bell South. For example, John Spencer, regional director of product marketing engineering, used to work at Bell South. Greg Peters the company’s president and CEO used to work at Advanced Fibre Communications Inc. (Nasdaq: AFCI), a company that sells telecom gear to RBOCs like BellSouth.

“One of the really good things about this company is that we have staffed it with folks that have a long history of meeting the needs of Bell operating companies,” says Chris Rust, a director on Mahi’s board and a principal partner at Sequoia Capital, one of Mahi’s investors.

Mahi denies that any contract has been signed. “It’s just not true,” says Ron Longo, vice president of sales and marketing for Mahi.

What makes Mahi so hot? The Mahi box promises to combine legacy transport, like Sonet and TDM; optical transport like WDM; IP routing; switching; and MPLS functionality into one platform. It’s specifically geared to metropolitan-area central offices where it can take the place of several, expensive boxes, putting Mahi head-to-head with other God-box companies like Maple Optical Systems.

Other startups have gone down this road before. Tenor Networks Inc. also tried to make a big MPLS God box for the metro core and has since found itself at a funding deadend.

What makes Mahi different from those other boxes is the technology inside. It has been able to leverage cutting-edge, off-the-shelf technology that should help it get to market at least six to 12 months sooner than if it had developed all its technology in-house.

Specifically, sources say the company is using the latest 320-Gbit/s capacity chipsets from PMC–Sierra for its switch fabric, instead of developing its own ASICs. Alcatel SA (NYSE: ALA; Paris: CGEP:PA) is also said to have a design contract for the same chipsets. The chipset, known as the TT1, came out of PMC’s 1999 acquisition of a startup called Abrizio. It’s believed that Mahi has been working with the Abrizio engineers for some time, since the two companies share a common VC: Chris Rust of Sequoia Capital. The TT1 chipset was announced back in April 2000, but has not shown up in commercial deployments yet, says Bob Wheeler, a research analyst from the Linley Group.

“Using off-the-shelf silicon can cut back on resources enormously, especially for startups like Mahi,” he says. “Not having to hire an ASIC design team removes a lot of expense and risk for the company.”

PMC is ahead of the pack in its development of 320 Gbit/s, with competitors like Vitesse Semiconductor Corp. (Nasdaq: VTSS) and IBM Corp. (NYSE: IBM) lagging behind with slower chips, says Wheeler. Its closest competitor is ZettaCom Inc., a startup that has also announced it is working on a 320-Gbit/s chipset.

If Mahi is able to deliver a product by the end of the year (which Greg Peters, its CEO, has stated previously as the company’s target) it could be the first system vendor to ship a product with an off-the-shelf switch fabric of this magnitude.

But the first generation of the TT1 may come with baggage attached. Analysts, including Wheeler, who cover the semiconductor industry say that it has an enormous chip count, which means more chips must be deployed in the system to support the large switch fabric. What this means for system companies is that chassis slots must be taken up with line cards to support the enormous fabric, which in turn means fewer ports for line cards with revenue-generating interfaces.

Wheeler says that PMC is expected to announce a more tightly integrated upgrade to the TT1 within the next few months, but these new features wouldn’t likely show up in a product like Mahi’s for at least a year. Despite these integration issues, Wheeler says that the PMC chipset still gives Mahi a leg up on its competitors.

“It puts them ahead in terms of time of market, and that’s important for a startup,” he says. “They [Mahi] can always go back and reduce the cost of the product when the next generation of silicon becomes available.” - Marguerite Reardon, Senior Editor, Light Reading

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rustybridge 12/4/2012 | 7:53:58 PM
re: Mahi Secrets Surface Anyone out there hear any info about their third round? Last rumour I heard was that they were going to run out of money in August, but they got a bridge loan to tie them over until they close their third round...

Last rumour after that was that Goldman Sachs would round out the round to $100M, but only if they found a lead for the due diligence... and they were having trouble finding that lead.

People on the inside are pumped up with optimism as always, but it feels oddly like the Ironbridge enthusiasm where everyone was pumped up right through the Friday evening before they closed the doors on Monday morning...

What's the scoop here?

lighty 12/4/2012 | 7:52:13 PM
re: Mahi Secrets Surface has anybody heard about layoffs that occured at maple. Atleast 50 people have been let go. Optical switch gets canned and the whole optical team gets booted. what going to happen to the "godbox"
knowinfo 12/4/2012 | 7:52:12 PM
re: Mahi Secrets Surface I have heard this is the 3rd round of layoffs. As many as 10 ASIC engineers have already left, and the product has been delayed. I guess another bites the dust in SV.
knowinfo 12/4/2012 | 7:52:11 PM
re: Mahi Secrets Surface knowinfo,

I made a few a phone calls and found out what you said is true. ASIC people have left, ML8K optical switch that maple could not market did got canned, with it the whole team including the VP that ran the show. There were also layoffs in canada. I guess my question is what is optical
now at maple optical. They are in trouble for sure. The management is not seasoned at all.
Friends tell me that HW team has not been able to complete any of their design so much for that group. Must be some egoist running the team he is next.
exnortel2 12/4/2012 | 7:49:56 PM
re: Mahi Secrets Surface Rumour says that Mahi laid off 100+ employees. What is the future outlook for the star in Petaluma ?
botermalujilly 12/4/2012 | 7:49:55 PM
re: Mahi Secrets Surface This must mean the anticipated BellSouth contract of about $300 million won't be happening anytime soon, if at all.

ipoverbus 12/4/2012 | 7:49:55 PM
re: Mahi Secrets Surface hmm... any rumors about Mahi's neighbor down
the road, i.e. Turin Networks?

good news travels fast, bad news travels slow...
ExNortel 12/4/2012 | 7:49:53 PM
re: Mahi Secrets Surface There never was a Bellsouth contract.

The birdie that was singing at my window this morning said something about pissing off the BS folks so bad with this bullcrap, they were talking to the legal team within BS about action. Then the birdie flew away...

Then, of course, the WTC/DC stuff happened and everything was put in perspective with what is important in life, and it ain't startups, making millions anymore, ego driven power nutz, etc.

God box = sure failure and doom. Duh, this ain't new news.

God Bless America
my2cents 12/4/2012 | 7:49:50 PM
re: Mahi Secrets Surface Starup marketing departments are known to spin such things. Wavesmith earlier claimed customer trials at Comcast, Genuity and Verizon. Now they only talk about Genuity.
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