Meet Me in Southborough, MA?

Celox Networks, a Southborough, Mass., startup developing an IP service router, shut down its research and development facility in St. Louis, Mo., on Monday.

This move doesn't appear to be your run-of-the-mill startup layoff. Rather than just slashing a percentage of staff, Celox appears to have cut an entire development center -- the very same development center it once touted as being cutting-edge and key to its product. But the company argues that it's not as bad as it sounds, because it's offering to relocate employees.

The St. Louis facility, which developed the hardware and firmware for the company's SCx19 edge-routing and broadband aggregation product, employs 90 people, most of them engineers. According to Hugh Kelly, executive vice president of Celox, the facility will remain open for 60 days. Only eight of the 90 employees -- all of whom were support staff -- were laid off. The remaining 82 people were all engineers, and each of them has been offered the opportunity to relocate to the Southborough office.

Kelly says the facility was closed because it became too expensive to run two separate facilities. The company has already raised $155 million in three rounds and is supposedly out looking for a fourth. But Kelly says the short-term goal is to cut costs, a process which began in October of 2001 when it laid off 25 percent of its staff, reducing its total headcount to 200 employees (see Celox Battens Down the Hatch). Just prior to the closing of the St. Louis facility, the company was down to about 180 employees.

But engineers from the St. Louis facility see the situation differently. In an email to Light Reading, one engineer wrote:

"This box was conceived, designed, and built with St. Louis know-how. Yes, we worked long, hard hours and created a kick-ass product. The founders now are very discouraged. They sold their dreams and their hopes to Kent [Mathy], on empty promises. Kent stated, 'We need a Boston presence in order to be a telecom company.' Well, the Boston presence has been the biggest drain on company resources."

In addition, several employees noted in other emails to Light Reading that there are dozens of employees with H-1B visas likely to lose their jobs.

Even though the majority of the St. Louis staff has been asked to transfer to Southborough, it’s still too early to tell just how many will actually make the move, says Kelly. "We expect that some people will feel rooted to the St. Louis area and won’t want to leave," he says. "But we know of some who will come with us."

Of course, a move to Boston is not exactly an enticing deal if you have St. Louis roots -- the cost of living is much higher in Mass. than it is in Mo.

But further, several employees noted in their correspondence that the removal of the facility could kill the engineering soul of the company.

The company's five founders, Manju Hegde, now CTO of the company, Otto Schmid, Jean Bordes, Monier Maher, and Curtis Davis, had all been working in St. Louis in January 1999 when the company was founded. A year later, they brought in Kent Mathy, an 18-year AT&T Corp. (NYSE: T) veteran, to take over as CEO. Later that year, he relocated the company’s headquarters to Massachusetts.

While most of the hardware expertise still remained in St. Louis with the founders, the marketing, sales, and software teams were based out of the Boston area. At the time this move seemed necessary, as startups were fighting to recruit engineers.

"There really wasn’t anyone in St. Louis knowledgeable about product marketing or routing," Kelly says. "You needed to be in Boston or California to be able to recruit those people."

Most analysts and experts agree that Celox has a real working product and its performance is impressive. It can scale to over 6 million broadband subscribers in half of a telecom rack. It supports a full suite of routing protocols including support for MPLS. But it hasn’t been able to nail down a customer. Some say the box’s performance is too much for some service providers. Others blame it on carriers' reduced capital spending plans.

But Celox is targeting an already crowded market, and one that hasn't developed as quickly as it would have liked. It faces competition from companies such as CoSine Communications Inc. (Nasdaq: COSN) and Nortel Networks Corp. (NYSE/Toronto: NT). It’s also feeling increased pressure from IP edge router companies such as Cisco Systems Inc. (Nasdaq: CSCO), Juniper Networks Inc. (Nasdaq: JNPR), and Unisphere Networks Inc., as well as from subscriber management companies such as Redback Networks Inc. (Nasdaq: RBAK), all of which are adding IP services to their boxes (see Edge Routing Gets Service Friendly ). Then there are the startups, such as Corona Networks Inc. and Quarry Technologies Inc., which haven't made much headway in terms of customers either.

"Some companies like CoSine are announcing wins, but if you look at their revenues they are still down," says Kevin Mitchell an analyst with Infonetics Research Inc.. "That to me means these wins are pretty small. The market isn’t really there yet."

While CEO Mathy was able to get the Celox boxes into trials at AT&T, those tests haven't resulted in revenue yet. Kelly says the company is being tested in other carrier networks, but that the process is just taking longer now. Unfortunately for Celox, time and money may be running out.

"No money, no sales, and no engineering," writes a disgruntled engineer from St. Louis. "Good-bye Celox. This is not a hibernation but a deathblow."

— Marguerite Reardon, Senior Editor, Light Reading
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emma 12/4/2012 | 10:14:16 PM
re: Meet Me in Southborough, MA? I'm a new member of the Massachusetts telecom unemployed, and there must be as many of us unemployed workers as there are Celox-retained recruiters. I'm getting at a least one cold call a week to work for Celox. No thanks!

They are hiring only the best recruiting talent - the last recruiter asked me to manage their OSPF routing group, and I haven't even looked at a line of code for over four years...

Of course, the real problem is that they're trying to build an edge router and a BRAS a miniscule staff, just like their counterpart Corona Networks in Silicon Valley. And BTW, it needs to operate at 10G. God boxes are soooo 1999, and even doing a reasonable BRAS needs a far bigger staff than Corona and Celox put together. Lucent has 300+ engineers working on Springtide alone...

Considering that we don't see any widely deployed eBGP enterprise edge routing solutions from Shasta/Nortel, Lucent/Springtide, Redback, or CoSine, its little wonder that the recruiters are coming up empty trying to convince folks that Celox can do it with technical talent imported from... St. Louis??!

OptixCal 12/4/2012 | 10:14:13 PM
re: Meet Me in Southborough, MA? Hey Emma,
Why the wailing and gnashing of teeth over getting a job offer? If they're hiring only the best, and they're calling you, you should be flattered.

Besides, don't knock St. Louis, they gave us the Rams, who won a Super Bowl and THEY were imported from Los Angeles! The Rams, By The Way (Oh, that's what BTW is!) were imported from Cleveland! Just a bit of Sports Trivia.
tbrss 12/4/2012 | 10:14:12 PM
re: Meet Me in Southborough, MA? Stick a fork in them, they are done
seeallwan 12/4/2012 | 10:14:12 PM
re: Meet Me in Southborough, MA? Well OptixCal, if emma is getting the same bad info on Celox like what lightreading has presented to all of us, then why would they go there? There are jobs out there, you just have to be patient.

Also, didn't a team from Massachusetts beat the mighty St. Louis Rams?...just a little more trivia.

Oh, BTW...I guess Massachusetts won again over another St. Louis located team too.

Sorry, couldn't resist.
yomama 12/4/2012 | 10:14:10 PM
re: Meet Me in Southborough, MA? How can you build a successful switch/router/god box with a bunch on Boeing Engineers that built planes in St Louis? I know I used to work for Celox Networks is Southboro, I left on my own after I figured out that I had made a big mistake and of course I was not an X-Motorola employee which is a requirement to be in "the click", for god's sake the X- HR Manager was a convenience store owner before he got a job at Celox if you can believe that!

Yo Dude where have the free lunches gone?

Yours truly-- Yomama!!!!!!!!!!!!!!!!!!!!!!!
no_spinzone 12/4/2012 | 10:14:08 PM
re: Meet Me in Southborough, MA? First off, Yomama, I'm sorry about your experience with Celox. But I strongly believe that you are painting the wrong picture, although
you may be right about the office in MA. Let me
tell you that the St. Louis office was not just
Boeing engineers. The Boeing folks that do
work in St. Louis are top notch, I'm not sure why
you are knocking them. You must be from the east
The St. Louis engineering staff is excellent. They have produced an awesome product. It absolutely kicks ass in performance and scale.

This product was conceived and built in St. Louis.
Unfortunately VC money required a "dream team" from Boston. The founders lost control after a year or so. They had set the culture in St. Louis,
and all the engineers followed behind. It was
amazing to see the dedication of these guys. But the "leaders" in Boston wanted the power to themselves, and couldn't see what they had in front of them. The St. Louis attitude was to do
whatever it took to get the job done. There were absolutely no politics. But as soon as the Boston office opened, managers there were set upon building their power base. That was the beginning of the end. The two cultures collided. On one hand you had the do-what-it-takes St. Louis staff versus the 9-5 Boston staff. It didn't work.
But guess what? When it came down to closing an office, the decision was St. Louis. Guess how many executives were let go after pissing away $155 million? Guess where the executives live?

For those of you who think that St. Louis engineers can't do telecom, think again. I would
like to hear your comments on this board if you think telecom can or can't be done in St. Louis.

Also, most folks in St. Louis will not be able to move to Boston. There is one hell of a team still here, that would like to stay together. Anyone looking for a damn good development team?
yomama 12/4/2012 | 10:14:06 PM
re: Meet Me in Southborough, MA? Ok, maybe I was too hard on St Louis, the product is impressive, but I don't know if it was too much too late and a slumping market did not help things, I totally agree with the St Louis/ Ma clash, one of the first things I heard when I joined Celox was that the St Louis folks were not too happy about it. Maybe I was just taking out my fustration because of the time I wasted there. Also a former founder of the company that is no longer there had a serious attitude problem and other things in Southboro that just did not make sense, I've talked to people who told me they declined offers from Celox because they thought the infastructure was too fragile, it looks like they turned out to be right.

Anywqay I hope you guys in St Louis fine jobs in this shitty market, I also agree with you that most engineers in St Louis will not move to Ma.

Good Luck!!

listen2this 12/4/2012 | 10:14:06 PM
re: Meet Me in Southborough, MA? hay, does anyone from the mass/495 area realy know
how bad the job market is??? I'm a hardware eng. and I don't know of anyone that want a job that doesn't have one.
plumpy 12/4/2012 | 10:14:05 PM
re: Meet Me in Southborough, MA? Random thoughts:

1) The St. Louis Rams are the only team in history that won a single Super Bowl and considers themselves a "Dynasty".

2) If I see Kurt Warner waving another Bible in front of the camera, I will take a 12 gauge to my TV.

3) Clorox was predicated on a ridiculous assumption: "We will terminate all of North America's DSL in a single box." Do some math for 12 seconds and calculate the boob factor in that statement.

4) St. Louis was the site of the last malaria outbreak in USA.

fusionboy 12/4/2012 | 10:14:05 PM
re: Meet Me in Southborough, MA? Celox has closed their St. Louis facility - and yet they still have jobs posted for it! Come one folks - can we be professional about this? It's really not that hard to call the webmaster!
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