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Optical/IP

Pluris CEO Bolts

Five-year-old terabit-routing startup Pluris Inc. is losing its top executive. President, CEO, and chairman of the board Joe Kennedy, who took the job three years ago, is leaving the company.

The move comes just after Pluris completed a contentious fifth round of funding.

Pluris closed the $53 million round in February, bringing the total amount raised to $215 million (see Washout Rains $53M on Pluris). Notably, three of the company’s previous investors dropped out of the round. The remaining investors, J.P. Morgan & Co., ComVentures, and Crescendo Ventures restructured the equity to entice investors and employees to stick with the company. This is commonly known in the venture-capital community as a "washout" or "cram-down" round, wherein the valuation is so much lower than previous rounds that it massively dilutes previous investors' stakes.

The official word from the company is that Kennedy is leaving to pursue "other interests." But a source close to Pluris says that isn’t the whole story.

"Let’s just say there was strain between Joe and the board during the last round of financing," says the source, who asked not to be named. "While some of this was mitigated by the closing of that round, not of all of the hard feelings went away."

Kennedy says he bears no ill feelings toward Pluris’s VCs. “I’m not at all bitter,” he says. “But I did learn one thing. Now more than ever, it's important to understand the quality of your investors. Everybody’s a nice guy at a party, but you need to be able to count on them for substantive support when things get tough. When you’re in a financial crunch, everyone thinks they are an operations expert even when the experience isn’t there.”

Well, at least he's not bitter.

Kennedy, whose stock option vesting was accelerated as part of his departure package, also says that his leaving should not be interpreted as a negative sign for the company’s health. In fact, he says the company is poised to finally begin shipping products for revenue. Trials at Qwest Communications International Inc. (NYSE: Q), Level 3 Communications Inc. (Nasdaq: LVLT), and Deutsche Telekom AG (NYSE: DT) have all gone well, he stresses.

Even so, this might not mean a whole lot at the end of the day. Qwest has already stated several times that it is cutting its budget and not spending on new network builds or upgrades (see Qwest Keeps Cutting). Pluris is also trying to enter a market where Cisco Systems Inc. (Nasdaq: CSCO) and Juniper Networks Inc. (Nasdaq: JNPR) dominate with 99 percent market share. What's more, Juniper just warned that its revenues would be less than expected for the first quarter of 2002 (see Juniper: Guidance Down, Stock Up).

Other next-generation router startups include Caspian Networks, Chiaro Networks, and Hyperchip Inc. (see A New Optical Taxonomy). Then there is Avici Systems Inc. (Nasdaq: AVCI; Frankfurt: BVC7), which has been around just as long as Pluris: Although the company went through a successful IPO in 2000 and has actually shipped some product to customers, it still garners roughly one percent of the total core-router market.

Kennedy officially resigned two weeks ago, but he has agreed to stay on at the company until the board is able to find a suitable replacement. He says he doesn’t expect that process to take long.

“If you’re a potential CEO, this is perfect time to enter the company,” he says. “You are going to know what is going to happen to this company within nine months. It’s not like joining an earlier-stage company where you have to spend three or four years figuring out if it’s going to work or not. It’s relatively low risk.”

As for the future, Kennedy says he has no immediate plans. But most likely he will end up at another startup. He has never taken a private company public, but Kennedy has led his last three startups to acquisitions.

The Gigabit Ethernet startup Rapid City, where he was chairman and CEO, was sold to Bay Networks in 1997. Kennedy worked as vice president and general manager of Bay Networks’ switching division until June of 1998, when the company was acquired by Nortel Networks Corp. (NYSE/Toronto: NT). Prior to his tenure at Rapid City, Kennedy was president and CEO of Hughes LAN Systems, maker of bridges, routers, terminal servers and other LAN products. That sold to Whittaker Corp. in 1995. And before Hughes, he helped found Phoenix Technology, a LAN security company, which was sold to Bridge Communications.

— Marguerite Reardon, Senior Editor, Light Reading
http://www.lightreading.com
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cyclical 12/4/2012 | 10:42:03 PM
re: Pluris CEO Bolts
Now the life time is less than expected for pluris. Light reading didn't mention about charlotte's networks. Joe is not telling what happened Global crossing and DT. They rejected?? pluris. Everyone knows WCOM and sprint rejected from the begining. Joe knows the future for this company, he's not that heavy hitter to take it public. He's tried to sell the company, there is not buyers at this time. Good luck joe, not this time, you can do with another startup.

I know employees are looking out for jobs for last few months. No competitor is recruiting though, poor folks.
cyclical 12/4/2012 | 10:42:02 PM
re: Pluris CEO Bolts expect every thing before 9 months. Everyone knows by then. The money they got from 5th round will last for 6-8 months. 9th month is curcial to live as a company.
optical_IP 12/4/2012 | 10:42:02 PM
re: Pluris CEO Bolts Any rumors of pending layoffs ?
can anybody please care to comment.

optical_IP
cyclical 12/4/2012 | 10:42:02 PM
re: Pluris CEO Bolts
GÇ£If youGÇÖre a potential CEO, this is perfect time to enter the company,GÇ¥ he says. GÇ£You are going to know what is going to happen to this company within nine months. ItGÇÖs not like joining an earlier-stage company where you have to spend three or four years figuring out if itGÇÖs going to work or not. ItGÇÖs relatively low risk.GÇ¥

Any new mba grad can experiment with 9 months experience. not an experienced CEO, unless he/she wants spoil their reputation in the industry.

New CEO should consider:
-Investors didn't come forward
-Product didn't go to customer after 5 yrs
-valuation was pretty bad
-It's your risk

skeptic 12/4/2012 | 10:42:01 PM
re: Pluris CEO Bolts
I still can't figure why they got their last
round. They have been in trials for a while
with no serious interest as far as I can tell
from anyone.

One possibility is that the CEO leaving is a
sign they intend to "fire-sale" the company.
The round gives them enough time to do so and
since it was a washout, there is still some
possibility of some (not all) investors
making money on even a low sale price. But
I dont know who would buy them. The engineering
staff is probably worth something (if they can
keep it).


cyclical 12/4/2012 | 10:42:00 PM
re: Pluris CEO Bolts The issue is engineering, engineering couldn't deliver on time. When it delivered customers evoporated. I don't any body needs their skills at this time.
Recall, Ironbridge when it wants to sell 30 patents, no body bought any thing. It just died on its own.
Another one IPOptical, it died because there was no funding and all employees had to move to hyperchip.
For pluris, eng. talent they have s not needed for cisco or redback. They have industry recognized engineers. Pluris doesn't have any well known routing or hardware engineer to name.
cruiser 12/4/2012 | 10:41:59 PM
re: Pluris CEO Bolts skeptic you're right on here. it's both puzzling and troubling that even today in this miserable market, vc's would throw good money after bad and continue to fund this dog. what do they tell their lp's now? "well, we beat up the ceo so badly that he quit but at least your a, b, c, d, e, f, g rounds are worthless because we re-capped. oh, and i forgot to mention: we have no way to recruit a replacement ceo because the story sucks and the ceo has publicly derided us for the way we handled the situation. so the inmates are running the asylum now."

a fool and his money...
skeptic 12/4/2012 | 10:41:59 PM
re: Pluris CEO Bolts The issue is engineering, engineering couldn't deliver on time. When it delivered customers evoporated.

I don't any body needs their skills at this time.
Recall, Ironbridge when it wants to sell 30 patents, no body bought any thing. It just died on its own.
Another one IPOptical, it died because there was no funding and all employees had to move to hyperchip.
---------------
The difference between Pluris and the other two
you name is that Pluris actually finished
a product. Ironbridge was an incomplete mess
and ipoptical never really got started (and never
should have been funded in the first place).

I still dont know if anyone would want anything
that pluris has (including staff). I was just
trying to think of a reason their investors
could have used to convince themselves that pluris
was worth putting more money into.

But then again, somehow caspian convinced VCs
to put 120 million into a company that while
claiming (at the time) in public to have been
in lab trial for a year, still didn't even
have all its chips back from the fab.



pooh-bear 12/4/2012 | 10:41:58 PM
re: Pluris CEO Bolts While your observations about Caspian may be right on, you seem to consistenly bash them as well.

Is this something personal?
ARBoy 12/4/2012 | 10:41:58 PM
re: Pluris CEO Bolts None of us will ever know the truth behind the funding of either Pluris or Caspian. Why on earth would anyone put money into Pluris or Caspian when the big two own 99 per cent of the market. The money that both companies received had to come with significant caveats. No-one in this market is just going to hand you millions of $$$ these days. As with the question about Pluris and layoffs, any news on Caspian since their funding? As I've said on this board many times, how can they continue to run a company of 300 people when they have no revenue or customers? Surely, those VC companies know that burn rate is everyhting?
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