Rust Out, Cadogan In at Mahi
Mahi Networks Inc. is changing CEOs, apparently in an effort to help haul in some big carrier customers, including MCI Inc. (Nasdaq: MCIP).
Chief executive Chris Rust is stepping down, Mahi announced today (see Mahi Appoints Cadogan CEO). His replacement will be board member Bill Cadogan, who built ADC Telecommunications Inc. (Nasdaq: ADCT) into a telecom powerhouse and lately has been a venture capitalist with St. Paul Venture Capital, now Vesbridge Partners LLC.
Rust was a VC himself, having worked with Sequoia Capital, an early investor in Mahi. Explaining Rust's abrupt departure, Mahi officials said he's interested in returning to his VC roots.
A source close to Mahi says Cadogan is being called upon to reel in MCI. Mahi reportedly has been in consideration for MCI's "Humpty DACS" core-transport upgrade, which calls for a switch handling 48,000 STS-1s (see Sources: Mahi Moves Include MCI Win). MCI has declined to comment on the vendors being considered for the project.
Such a deal would be a huge milestone for Mahi, as it would be the company's first win with a major carrier. Mahi's wins so far have been with small regional providers, and it needs bigger customers if it's to survive against competitors including Tropic Networks Inc. -- which recently gained the star power of Alcatel SA (NYSE: ALA; Paris: CGEP:PA) as a partner -- and Movaz Networks Inc. (see Buckeye Extends Mahi Deployment and Alcatel Shows Off Tropic Tech).
Mahi is rumored to have deals with BellSouth Corp. (NYSE: BLS) and SBC Communications Inc. (NYSE: SBC) in the works as well. If that's true, Cadogan's heavyweight status (figuratively speaking, of course) would come in handy. Mahi officials declined to comment on whether these two carriers are potential customers.
Mahi bought some time in its wait for some big contracts, raising $70 million last summer. The company also bought the assets of defunct DWDM equipment provider Photuris, presumably at a bargain-basement price (see Mahi Nabs $70M, Photuris Assets).
Mahi is among the systems startups pioneering the reconfigurable optical add/drop multiplexer, a device that promises quick switching at the wavelength level without manual plugging and unplugging of cables (see Who Makes What: ROADMs). Carriers hope to use ROADMs to cut operational costs on the optical network and to provide wavelength services that could be provisioned remotely.
For Mahi, there's also hope in the burgeoning realm of Ethernet services, because local exchange carriers often put Ethernet services onto DS3 or Sonet links. The inclusion of TDM links often forces carriers to buy a separate aggregation switch, but Mahi offers the chance for integrated TDM switching, says Scott Clavenna, analyst for Heavy Reading, Light Reading's paid research arm.
"You need something that can terminate DS3s and Sonet and peel out the Ethernet, aggregate it onto higher speed links, then transport it to the large metro core POPs in a city," Clavenna writes in an email. "Now that they have Photuris, that transport can be DWDM, with built-in ROADM for flexibility."
— Craig Matsumoto, Senior Editor, Light Reading
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