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Optical/IP

Qwest Blows Hot and Cold on Startups

Just when prospects for startups were looking bleak at Qwest Communications International Inc. (NYSE: Q), the company's network engineering department has undergone another management shakeup.

Last month, Light Reading reported that Qwest executives were on a mission to reduce the company’s reliance on technology from startups (see Is Qwest Shunning Startups?). Apparently, James L. Becker, Qwest’s then executive vice president of worldwide and IP networks, had told venture capitalists that Qwest needed to limit the type of testing it could do for startup equipment companies.

Qwest was once known as the king-maker of startups, having helped, among others, Corvis Corp. (Nasdaq: CORV), CoSine Communications Inc. (Nasdaq: COSN), Juniper Networks Inc. (Nasdaq: JNPR), and Redback Networks Inc. (Nasdaq: RBAK). But the carrier has been in so much financial trouble lately that word was it could only accept equipment that was ready for general availability.

Well, today a new rumor circulates. Becker has recently moved to another department -- he now becomes vice president of Qwest's new customer operations unit -- and word on the street has it that the new guy on the block, former executive vice president for local networks Augie Cruciotti, will be more lenient on the startups.

Some observers claim that Cruciotti, now executive vice president of network services, has indicated that he wants to use the best technology, regardless of whether its from a startup or not. Even if Qwest never had a policy to shun startups, they say, a change of management could result in a change of attitude about which technologies the company should be funding.

A spokesperson for Qwest, however, said yesterday that the company doesn’t expect there to be any policy changes with the change of leadership in the network services division. The company would not comment on whether it has or has ever had an explicit policy not to buy startup products, and neither Becker nor Cruciotti were available for comment.

Some experts say puzzling over whether the company likes startups amounts to hair splitting, considering that Qwest has larger problems. While Qwest has not been quick to buy startup products over the last months, the company hasn’t exactly been beating on the doors of incumbent vendors either. With its $26 billion debt load, plummeting revenues, massive layoffs, and its capital spending cut to about half of what it was a year ago, Qwest isn’t in much of a position to buy new products from anyone (see Qwest Posts Loss, Preps Asset Sales).

"No one has said, ‘No we won’t buy from startups,' ” says Bart Schachter, cofounder of Blueprint Ventures. “Qwest has been pounded in the market and had to slash its capex budget. Overall, purchasing has been reduced, and that reduction affects all vendors.”

“I can’t remember the last announcement of Qwest buying from anyone,” Doug Green, founder of The Bradam Group, agrees. And that, he says, makes it hard to identify any specific policy at the company to avoid startups. “If they’d been buying a lot, it would be easier to see evidence of a policy.”

And when the service providers are balancing on the edge of bankruptcy, it should come as no surprise that they are less likely to take their chances with new players and new technology. “They’re in no rush to deploy new, advanced services,” Schachter says. “They’re being very conservative.”

Qwest isn’t the only carrier feeling less adventurous. In the midst of a telecom meltdown, almost all service providers are trying to weather the storm by sticking to the vendors they know and feel confident will have the financial strength to see their products through development.

Many applaud this prudent approach as a return to sanity. “Six or seven years ago, most large carriers didn’t buy from startups,” Green says. “If they were interested in a startup’s technology, they would try to get them to send it through a channel that they trusted… through channel partners.” That way, he says, if the startup went under, the channel partner -- for example, Lucent Technologies Inc. (NYSE: LU) -- would guarantee to see the product through development. “We seem to be going back to that model."

— Eugénie Larson, Reporter, Light Reading
http://www.lightreading.com
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LightBeating 12/4/2012 | 10:22:54 PM
re: Qwest Blows Hot and Cold on Startups Indeed, I couldn't figure it out!

Qwest is buying again from startups, no they're not, but they always have, no it was the other guy, the new guy doesn't, no it was the old guy who didn't, now they think it's a good thing, no, they're prudent, they have a policy, no they don't have one, oh and they're not buying anything anyway, so who cares...

Anyone care to explain to me ?

LB
RJC 12/4/2012 | 10:22:53 PM
re: Qwest Blows Hot and Cold on Startups It's simple enough. Here's a little timeline:

1) Long ago -- "Wahoo! We're made of money! Here, have some money! Give me stock options! Whee!!!"
2) a little while ago -- "Wow, we're gonna be broke soon. No more startups! We're only giving money to OSMINEd vendors!"
3) A few nanoseconds later -- "Wow, we're broke. Stop buying anything! Stop all contractor work!"
4) Last week -- "We're still broke, how about shuffling VPs around instead of thinking about how broke we are?"
5) This week -- LR does a writeup to clarify things.

opticaldude 12/4/2012 | 10:22:53 PM
re: Qwest Blows Hot and Cold on Startups LB,
I think you hit the nail. Qwest is in a state of confusion right now. But this is good news for the big guys, I think. As long as they stick to their guns on have only GA'ed product in there labs.
BobbyMax 12/4/2012 | 10:22:52 PM
re: Qwest Blows Hot and Cold on Startups Qwest has suffered the worst losses in the history of RBOCs. There is much ineptness and mismanagement in the company. The current management always wanted to grab headlines. The headlines came only through testing products came by conductrialing trials on products produced by inexperienced start-ups and newcomers to the telecom business. In doing so, it joined the ranks of Global Crossing,Yipes, and Williams Communications, etc. The company plundered a lot of its resouces and became disoriented by conducting product trials from obscure companies.

I have never seen any RBOC buying product from start-ups. It is particularly disturbing that the company would not focus on its main line business. There was also many scandals involving unfair salaries and stock options.

Unfortunately the Board of Directors of Qwest is not independent and it has failed to take appropriate actions to safeguard the intersts of shareholders.

I cannot think of any circumstances under which Qwest can recover from tremendous financial losses that it has incurred.
Emily2 12/4/2012 | 10:22:50 PM
re: Qwest Blows Hot and Cold on Startups Qwest IP Engineering is by far the most bruised, and battered organization w/in the company. They have prescheduled annual lay offs, where everyone but the lab rats gets re-org'd. Since the vendors (startup & stalwart) get to do their own evaluations the IP engineers are mostly soft as well.

555 17th St. if only those walls could speak!!

RIP - Exec's
Vab Goel
Mike Peruse
Jim Becker

RIP - Engineers
too many to list

Qwest's lab is chock full of startup gear, as most exec's portfolio's are chock full of startup stock options!! <snip>PERUSE<snip>

Hmmm...how about $15mill worth of CoSine Gear purchased w/o lab trials as an example! You go Uncle Phil!

Avici? Hmm....just wondering.



</snip></snip>
xoip 12/4/2012 | 10:22:49 PM
re: Qwest Blows Hot and Cold on Startups This is the best news yet for core router startups currently in trials or in their lab.

Hurrah
XoIP
skeptic 12/4/2012 | 10:22:44 PM
re: Qwest Blows Hot and Cold on Startups Unfortunately the Board of Directors of Qwest is not independent and it has failed to take appropriate actions to safeguard the intersts of shareholders.
======================

The problems at Qwest have nothing to do with
startups. The have to do with the fact that
Qwests business model was unsound. Qwest is
being "saved" at the expense of the old US west
(the RBOC portion).

Would OSMINE certification or avoiding startups
have made any difference in what happened? No.

Your comments to the effect that companies
became "disoriented" by doing trials is absurd.
If they had gone to the dinosaurs for every
product and gotten certification on every
product they deployed, it would have made no
difference in their financial situation now.
jamesbond 12/4/2012 | 10:22:43 PM
re: Qwest Blows Hot and Cold on Startups Maybe startups did not contribute to the
QWEST failure directly. But if the Qwest
execs weren't so busy trying to get into bed
with networking startups (to get options ofcourse)
maybe they would have paid more attention to
the real business and this wouldn't have
happened.

is that possible? Btw what was Qwest's
"business model" ?
skeptic 12/4/2012 | 10:22:41 PM
re: Qwest Blows Hot and Cold on Startups But if the Qwest
execs weren't so busy trying to get into bed
with networking startups (to get options ofcourse)
maybe they would have paid more attention to
the real business and this wouldn't have
happened.
--------------------------
Who is doing better than they are? What more
could they have done? They made the best
business decision possible by exchanging their
inflated stock value for US west at just the
right time which gave them enough cash flow
to (probably) survive.

Even with all their problems, I think Qwest is
in a better position than Genuity, Level-3,
Global crossing or williams.
older&wiser 12/4/2012 | 10:22:30 PM
re: Qwest Blows Hot and Cold on Startups QWEST picked up the management team that built UUNET. That is where Jim Becker came from, though I don't think he was one of the early UUNET guys.

When UUNET was built, there were no big guys in carrier data networking, so they alpha-tested equipment from the little guys. Look at Ascend. The difference now is that there is a choice and you don't have to buy alpha quality startup gear.
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