No Tomorrow for Chiaro
Two well-placed sources close to Chiaro say the company has effectively shut down, with only a "skeleton crew" remaining to button up its business between now and the end of January. Chiaro officials declined to comment.
A year ago, Chiaro had 125 employees, 90 of them in Texas. Much of the company's Israel-based staff was spun off during the summer to an optics company called Al Cielo Ltd. (See Chiaro Spins Off Optics.)
Having raised $210 million, the eight-year-old Chiaro needed an OEM partner -- or an acquirer -- to ignite its business. Chiaro claimed to be shortlisted by several Tier 1 vendors, but none was ready to trust its network core to a startup. (See Chiaro Lands an $80 Million Round, Chiaro Scores in Tiscali's Core, and Chiaro Seeks Its Footing.)
Chiaro did manage to get a $6 million infusion from ECI Telecom Ltd. in December 2004. ECI, which would later acquire edge-router vendor Laurel Networks Inc. , saw Chiaro as a cheap way to get into the core, and the two managed to land a Tiscali International Network contract together. But Chiaro's future apparently wasn't bright enough for ECI to trigger its option to acquire the company. (See Chiaro Lands ECI Investment and ECI to Buy Laurel for $88M.)
Dror Nahumi, ECI's VP of strategy & business development, declined to comment when Light Reading asked him about Chiaro's status.
One source says ECI is definitely aware of Chiaro's plight. "An ECI team was there interviewing some of the people," the source says. "They will hire some of the technical staff."
Chiaro joins a trail of the dead that includes Charlotte's Web, Hyperchip, Ironbridge, Pluris, and Procket Networks. Many simply vanished. Pieces of Procket were picked up by Cisco Systems Inc. (Nasdaq: CSCO), but the technology was shuttered. (See Pluris Shutdown Confirmed and Cisco to Pay $89M for Procket Assets.)
These companies strove to build the next-generation router, leapfrogging anything Cisco or Juniper Networks Inc. (NYSE: JNPR) had done. In particular, core-router startups went after scale, building systems that could be combined in multichassis configurations, for example.
It's not a likely career path for startups any more. For one thing, Cisco and Juniper have unveiled the CRS-1 and TX Matrix, respectively, each of which tackles the scale problem. (See Cisco Stumps for CRS-1 and Juniper Unveils the TX.)
Then there's the crippling expense. Judging from the names above, it's going to take at least $250 million for anyone else to start a core-router play, analyst Sam Wilson of JMP Securities wrote in a September 2004 report.
On top of that, the return on investment is years in coming, because large carriers -- the most likely customers for these boxes -- will run any core box through extensive trials before deploying it in substantial numbers. And that's assuming they're even in the market for a core box; core-network upgrades don't exactly come around every day.
Realizing all this, Chiaro built its Enstara router with an eye towards simplifying the network. Telecom vendors tend to buy routers in pairs -- one primary, one backup. Enstara was packed with high-availability features that could eliminate the need for doubling up routers, thus simplifying the network. Chiaro also claimed Enstara could replace the criss-crossing layers of routers that sit at the network core.
Without Chiaro to kick around, who's left standing? Avici Systems Inc. (Nasdaq: AVCI; Frankfurt: BVC7), which got its IPO done before the downturn hit, is still around but targeting second-tier carriers as well as customers beyond telecom. In June, for example, Avici announced a deal with Limelight Networks Inc. (Nasdaq: LLNW), which operates a network to deliver video and games. (See Avici Storms Supercomm.)
Caspian Networks Inc. likewise learned to think smaller, opting to push its "Flow-Based Networking" concept to the network edge rather than the core. (See Caspian Soaks Up $55M More.)
The good news is, Charo is doing just fine.
— Craig Matsumoto, Senior Editor, Light Reading