Startup Photuris Inc. confirmed today that it's effectively closed down.

The company has burned through the $40 million round of funding that it announced 18 months ago and has now put its staff on permanent unpaid leave. "Effective now, the assets are up for sale," Ashish Vengsarkar, founder and VP of product management, told Light Reading today.

Vengsarkar hopes to find a buyer that will take on not just his company's innovative metro network products but also at least some of the 50 staff that were furloughed last week. "The product will only make sense if it's acquired with some of the people that developed it," he said, denying reports that some key staff have already got jobs elsewhere.

The decision to pull the plug on the company was triggered by a "negative decision" by one of the three RBOCs trialing Photuris's equipment, according to Vengsarkar. He declines to say which RBOC, but it's almost certainly SBC Communications Inc. (NYSE: SBC), judging by an anonymous note sent to Light Reading by someone in the know, and a research note from UBS Investment Research analyst Nikos Theodosopoulos this morning.

Theodosopoulos's note says that SBC's RFP for reconfigurable add/drop multiplexers is worth "well under $50 million year" and is likely to be shared between two parties. The first party is likely to be an existing supplier -- probably Fujitsu Ltd. (OTC: FJTSY; Tokyo: 6702) or Nortel Networks Corp. (NYSE/Toronto: NT). The second party is likely to be a startup partnering with a major vendor -- either Movaz Networks Inc. with Lucent Technologies Inc. (NYSE: LU), Tropic Networks Inc. with Alcatel SA (NYSE: ALA; Paris: CGEP:PA), or Photuris with Siemens Information and Communications Networks Inc..

The Movaz/Lucent partnership is already official (see Lucent & Movaz Seal Deal). Tropic declined to comment. Vengsarkar declines to talk about any of the RBOC trials but says that Photuris was in talks with partners and that Siemens and UTStarcom Inc. (Nasdaq: UTSI) were "definitely the leading ones." Theodosopopoulos's note does not say that Photuris/Siemens had been knocked out of the running.

Photuris makes (or made) a metro DWDM box with a difference. It doesn't just multiplex low-speed signals onto a wavelength. It has a full-blown Sonet add-/drop mux (ADM) on a card, which makes for very efficient network upgrades according to Scott Clavenna, chief analyst for Heavy Reading. "Often times carriers still have to have Sonet ADMs next to metro DWDM systems for reasons of service protection, bandwidth management, and so on. With Photuris, they wouldn't. The linecard could do it all.

"I wouldn't take [Photuris's shutdown] as a rejection of the technology -- it was sound, if rather complex -- but more likely a rejection of strategy and execution."

Vengsarkar says the great thing about Photuris's box is (or "was" as he put it) that it eliminates complexity for carriers, by automating the process of recalculating power budgets when networks are reconfigured. The flip side of this was that the box was over-kill for small carriers where reconfiguring networks wasn't an everyday occurence and could be done manually. The market for big carriers created all sorts of complications, such as finding a big vendor to partner with.

It all came to an end last week with the "negative decision" from the unnamed RBOC. "We ran out of patience" says Vengsakar (not to mention money). The staff were sent home, and he's now phoning vendors to invite them to pick over what remains of the startup he helped found in January 2000.

— Peter Heywood, Founding Editor, Light Reading