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Rust Out, Cadogan In at Mahi

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News Analysis
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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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12/5/2012 | 1:09:05 AM
re: Rust Out, Cadogan In at Mahi
No, he's the idiot who almost killed it.
He purchased lots of companies, and made no effort to tie them into a cohesive plan. ADC could have been a powerhouse of leading-edge telecommunications systems, but caddy failed, failed, failed to do a damn thing to make it happen. So, just bent-metal and patch panels for ADC!

12/5/2012 | 1:08:59 AM
re: Rust Out, Cadogan In at Mahi
He had to get Picolight straightened out before he could take this job.

12/5/2012 | 1:08:54 AM
re: Rust Out, Cadogan In at Mahi
Just what the 5 biggest Carriers need. And this will obviously turn into run rate revenue before Mahi closes. Well Duh! it is 48,000 STS's after all.

Seriously... How many customers do they have now? 5 - 10 ? Can LR explain how the doors are kept open with a company that has been funded since mid - late 99' with such paltry sales.

Thankfully the RBOCS all use the TITAN 5500. That can be Mahi's low order grooming switch.

Can I get some GFP, VC and LCAS with that shake ?

12/5/2012 | 1:08:51 AM
re: Rust Out, Cadogan In at Mahi
Cmon Lightreading.....you can do better than this weak drivel...try this...

Before Rust Mahi had a CEO named Peters. And his Oddfather, at Sequoia - none other than Rust - funded him with over 100 million big ones. At the end of the day Peters had nothing to show for it - except for one hell of an orgy and a very worthwhile ...hic...hangover. He was excused and Rust was offered one last chance for redemption - he would be the new CEO. It was spun then, as now, as a matter of choice. A few months after taking over Rust proved his fundraising prowess by raising a unheard of 75 million - not from Sequoia - but from another cartel. Rust's Oddfather in this transaction being non other than Cadogan. (See a pattern here?) And the proletariat rejoiced! And the orgy continued! At an even more frantic pace. It was like the bubble never ended. And it didn't. The 75 mil flew by. Was replaced by another 70 mil. The oddfather had legs! And the good times rolled. And then tragedy struck. Rust ran out of friends! And the oddfather, in a rare moment of sobriety, peeked out the reality window, couldn't believe what he saw, pulled out a calculator, made some calculations, came up with two too many Os, did some calculations again, came up with two too many O's again and shrieked My Shiny Ass! WeGre outa fGing money and we ain't got no fGing revenoose! This dragged the other VCs out of their drunken stupors - and after they convinced themselves there were no batteries to be replaced in the solar powered calculator - made Rust make like a shepherd. And handed the flock to the mighty Cadogan. See, see the pattern. And of course Cadogan is going to reel in MCI and Bell South. Just as Rust was to reel in MCI and Bell South and Peters was to reel in Qwest and on and on...but no oneGs biting yet. Jeez! So spin..spin...spin till the Daddy takes the T-bird away!

Can't really hold Peters responsible...he was only the Boy in the Bubble...hold Rust responsible...
Can't really hold Rust responsible... he was only a VC...hold Cadogan responsible
Can't really hold Cadogan responsible .....Cadogan..Cadogan ?...where are you ?

But Lightreading where were you? Simply hyping Mahi when you could fill us in on this wonderful soap opera...dumb down your audience and you drive yourself to extinction....you can do better than that...ta..ta..

12/5/2012 | 1:08:49 AM
re: Rust Out, Cadogan In at Mahi
Cmon KillerApp.

This is what LightReading is all about. They get it right (but it's boring, so you come along and fill them in), they get it half-right (and outraged employees of maligned company set the score straight), or they get it wrong (and the food fight starts).

How many journalists do they need, and how close to the truth do they have to get? All they need are anonymous letters to the editor, which is what the board is all about.

What we should thank LR for is a place to vent, and an occasional prod to do so. They tell us it is cathartic :-)


PS. Your side of the Mahi story is sooooo much more entertaining, and is probably even true.
Scott Raynovich
Scott Raynovich
12/5/2012 | 1:08:47 AM
re: Rust Out, Cadogan In at Mahi
>>Before Rust Mahi had a CEO named Peters....

Stuff that's 3+ years old doesn't really qualify as news, does it? We covered all this ground years ago.
12/5/2012 | 1:08:46 AM
re: Rust Out, Cadogan In at Mahi


But you did miss the "rumors" that Peter's trips to BellSouth were really to a friends place in the mode of dalliance.

12/5/2012 | 1:08:44 AM
re: Rust Out, Cadogan In at Mahi
Cadogan has so much of his VC and partners money tied up in Mahi at this point that he is really feeling the pressure to make this a success.

Isn't Cadogan the one that recruited some of the 'big guns" to Mahi recently? Time for the man to prove how good he is.

12/5/2012 | 1:08:39 AM
re: Rust Out, Cadogan In at Mahi

Peters is an idiot with an all year ,
Rust tried and is the real Founder behind Mahi, Cardogan is in deep s**t.

12/5/2012 | 1:08:35 AM
re: Rust Out, Cadogan In at Mahi

How many boards have looked at the facts like:

1. CEO in place multiple years
2. No profitable quarters
3. But lots of excuses (difficult market, technology, blah blah)
4. Fish start to rot at the head

and then fired the CEO? Kudos to Mahi. Too many CEOs have the wool firmly over the eyes of their boards.

As another poster mentioned, the bubble era startups without profits are hearing a loud ticking sound.
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