Movaz: Go Away, We're Fine

Bijan Khosravi, chairman and CEO of Movaz Networks Inc. knows how to kill a good rumor (or at least try to).

Kosravi got the dreaded "call from Light Reading" in relation to multiple spotty (read unsubstantiated) rumors that his company was getting a lookover from Lucent Technologies Inc.. Nope, says Khosravi. In fact, the CEO says the 200-person company's business is doing just fine on its own. Movaz has generated $15 million in revenue this year since it started shipping its metro dense wave-division multiplexing (DWDM) products early in the first quarter, Khosravi claims.

Khosravi says the company has deployed over 300 pieces of equipment in 16 customer networks. Although he wouldn’t give details, Khosravi also claims that unlike some competitors, such as Ciena Corp. (Nasdaq: CIEN), that are struggling to get 16 percent margins on their products, Movaz’s sales margins are much "healthier." What’s more, he claims that the company still has a significant portion of the $160 million in venture funding it has raised to date (see Movaz Scores $60M More).

"We have a fully funded business plan with revenue coming in," he says. "We don’t need any more cash investment, and we are well on our way to weathering the storm and becoming fully cash-flow positive."

Because Movaz is a private company, it is impossible to verify these figures. But analysts following the startup say they have heard similar rumblings and believe that with the customer wins that have been announced publicly, the company’s revenues are probably in this range.

Some of these customers include AOL Time Warner Inc. (NYSE: AOL), Emory University, Georgia Tech, and WorldCom Inc. (OTC: WCOEQ). It has also announced several reseller agreements in Asia and a recent win with Japanese system integrator VIC Tokai. Michael Howard, a principal analyst with Infonetics Research Inc. says the company has mostly been selling its RAYExpress product, a simple optical add drop multiplexer (OADM). But he says that it's RAYstar product is the more interesting product. It combines an OADM with distributed optical switching into a single 7-foot telecom rack.

"The RAYstar is mechanically very innovative," says Howard. "The packaging is very neat. It’s compact."

Rumors have been circulating this week that Movaz has drawn the attention of at least one incumbent equipment provider. Lucent Technologies Inc. (NYSE: LU) is rumored to be looking at the company as a possible partner or even an acquisition target. Khosravi vehemently denies this gossip.

"This is absolutely not true," he says. "Movaz has had no such discussions with Lucent whatsoever. I find it very disturbing that rumors like this would be going around."

A Lucent spokesperson said the company does not comment on speculation.

Lucent has announced three customers for its Metropolis EON platform, a 32-channel DWDM system designed to work with metro rings at data rates up to 10 Gbit/s: European provider Belgacom, Slovakia Telecom, and Verizon Communications Inc. (NYSE: VZ) (see Lucent/Verizon DWDM Deal: When?).

Tongues have been wagging because Verizon has been slow to deploy the EON gear. Some sources say the carrier may even be returning to its short list of candidates, which include Nortel Networks Corp. (NYSE/Toronto: NT) and Ciena.

A Lucent spokesperson denies these claims and says that the Metro EON DWDM product is in the final testing stage at Verizon's facility. It is expected to begin deployment next month, she adds. As for other customers, the company’s quarterly filing with the Securities and Exchange Commission (SEC), released earlier this week, notes the product is in 45 customer trials.

Some people theorize that Lucent could be interested in partnering with Movaz. Despite Khosravi’s denial, Movaz could also benefit from such deal. Merrill Lynch & Co. Inc. analyst Simon Leopold has noted in past research notes how difficult it is for startups to crack large incumbent accounts on their own.

"In these partnerships, the incumbent equipment players get the innovation, and the startups get access to a sales channel,” says Leopold.

The fact remains that despite all its alleged progress, Movaz hasn’t been able to win an account with a regional Bell operating company (RBOC). In June the company announced it had completed the critical Osmine certification process, an important milestone for integration into RBOC management systems. Khosravi says the company is seriously engaged with one RBOC. He wouldn’t say which one, but he emphasized it is definitely not Verizon.

"We are going to win contracts and rise on our own," says Khosravi. "We have revenue and plenty of cash, why would we need to sell out?"

— Marguerite Reardon, Senior Editor, Light Reading
kidcryptic 12/4/2012 | 9:09:45 PM
re: Movaz: Go Away, We're Fine Of course Bijan would deny it and rightfully so.

LUCY is a channel yes but not a very good one and to infect Movaz with all of the LUCY problems would not be helpful to this start-up. EON is a joke so I am sure LUCY wishes they had this product inhouse but I can't see it happening.

Good luck on keeping free from LUCY death grasp!
BobbyMax 12/4/2012 | 9:09:42 PM
re: Movaz: Go Away, We're Fine It would be even bigger setback for Lucent if it considers buying Movaz. Lucent has learned its lessons when it junky companies like Octel, Ascend, SpringTide, Nexabit, Yurie Networks, and Chromats, etc. Lucent can produce the most versatileproduct in the arena of telecommunications and networking. It has tremendous knowledge base and expertise which no other company would ever have. What happened is the direct result of the incompetence of the management.
GTalum 12/4/2012 | 9:09:36 PM
re: Movaz: Go Away, We're Fine Nice piece of investigative journalism! There is no such place/company/university. You are probably referring to the Georgia Instititute of Technology (colloquially called "Georgia Tech").

I guess we can assume you didn't check your sources, Ms. Reardon, to confirm Movaz's customers?
USA 12/4/2012 | 9:09:36 PM
re: Movaz: Go Away, We're Fine "It combines an OADM with distributed optical switching into a single 7-foot telecom rack."

"The RAYstar is mechanically very innovative," says Howard. "The packaging is very neat. ItGÇÖs compact."

I would sure hate to see their product if it WASN'T 'compact' !!
The Truth 12/4/2012 | 9:09:34 PM
re: Movaz: Go Away, We're Fine Did you actually "read" the article? It says, "...Emory University, Georgia Tech...".

What the heck are you talking about??????????
MrLight 12/4/2012 | 9:09:14 PM
re: Movaz: Go Away, We're Fine In regards to "It combines an OADM with distributed optical switching into a single 7-foot telecom rack"

The last time I saw it, Movaz had in the 7-foot 4 equipment shelves: the OADM shelf at the top, followed by the wavelength switch shelf, then a power shelf and then the management shelf at the bottom.

The wavelength switch was a free-space switch.

It looked to me that a full OADM configuration for 10 fibers with 40 wavelengths per fiber would require four 7 foot racks of equipment.

Has any of that changed?

MrLight :-)
LostInTheWoods 12/4/2012 | 9:09:03 PM
re: Movaz: Go Away, We're Fine The original article *did* say Georgia Tech University - a common porblem for lazy journalists, and LR's are about the worst (but also entertaining). I figure they edited the page content to correct the problem after the original post.
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