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Stealthy Startup Leads With Layoffs

Light Reading
News Analysis
Light Reading

Talk about making an entrance...

When Mukesh Chatter and Ray Stata founded Axiowave Networks Inc. nearly two years ago, they didn’t have much to say. They said their startup's main focus was optical networking, period. And they've pretty much stayed stealthy as can be -- until this week.

But here's a sign o' the times: The first real news to emerge from Axiowave is a layoff. On Monday, the startup handed pink slips to a department of engineers working on the company’s ultra-dense optical crossconnect switch. The news first came over the transom from an optical worker familiar with the move (cozy world, isn't it?).

CEO Chatter confirmed the layoff, but he says the number was "under 30" and that the product they were working on was only one of several DWDM boxes on the company’s roster.

"We saw what Nortel did with Xros," says the indefatigable Chatter, referring to the discontinuance of the Xros product line by Nortel Networks Corp. (NYSE/Toronto: NT) in early March (see Nortel Shuts Optical Switch Effort). "We saw the handwriting on the wall that the market for large-port-count crossconnects isn’t there. We decided to freeze our activity until the market returns."

Not to worry, though. Chatter says the company has another 150 employees working on a range of other products, including small and medium-sized optical crossconnects for the metro and core portions of carrier networks.

Industry sources believe Axiowave is creating a partially optical multiservice core switch that will be a competitor to the 7670 platform from Alcatel SA (NYSE: ALA; Paris: CGEP:PA) and gear from Équipe Communications Corp.

"We're making very good progess," Chatter says. Products are in trials with a number of prospects, and Axiowave plans to make an official announcement in the latter part of 2002.

Chatter and Stata founded Axiowave in May 2000, a few months after the core routing company they founded, Nexabit Networks, was purchased by Lucent Technologies Inc. (NYSE: LU) (see Chatter's New Box, Lucent Cleans Up Core Routing , and Whatever Happened to X?). In fact, many Lucent employees followed Chatter to Axiowave after he left to form the startup (see China Mobile Likes Juniper). Stata serves as Axiowave’s chairman.

The two also founded an optical fiber company, OmniGuide Communications Inc., in September 2000 (see A Fiber Filled With Air). Although Chatter isn't active in the management of that company, Stata is billed as its acting CEO.

Chatter says Axiowave is well funded, having raised about $80 million from Madison Dearborn Partners, Soros Private Equity Partners, and other sources, including some of Chatter's own money.

This sum is adequate for their short-term needs, but not yet enough for the long haul. "In this market, you're continually raising money in anticipation of a longer slowdown," Chatter maintains. "We never have enough."

Despite this week's inadvertent ripping aside of Axiowave's cloak of secrecy, Chatter maintains a quiet and cautious demeanor about the company's doings. "There's more to our story," he says, "But we're still in stealth."

— Mary Jander, Senior Editor, Light Reading

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User Rank: Light Beer
12/4/2012 | 10:39:41 PM
re: Stealthy Startup Leads With Layoffs
Let me tell ya the skinny. It's taken a lot of hard work to make something out of the old Nexabit platform. No thanks to the old Nexabit company. In my opinion, they used a lot of smoke and mirrors to sell the product to Lucent. Otherwise, Lucent would have or should have told them to take a hike.
User Rank: Light Beer
12/4/2012 | 10:39:37 PM
re: Stealthy Startup Leads With Layoffs
The TMX-880/Nexbit is in our field trials and doing well. Interesting architecture!
User Rank: Light Beer
12/4/2012 | 10:39:31 PM
re: Stealthy Startup Leads With Layoffs
We have been having good results--latency and jitter numbers look real good.
Recently, we were briefed by the account team and they presented it as the original nexabit architecture. Good job.

Mad Max
Mad Max,
User Rank: Light Beer
12/4/2012 | 10:39:14 PM
re: Stealthy Startup Leads With Layoffs
It's amazing the length people will go to cry sour grapes. Chatter is the consummate entrepreneur and did a nice job with Nexabit. Who can fault him or question his wisdom for cashing out of Lucent when the stock was at $70?? The Nexabit product was /is a VERY nice architecture, so much so that the buffer structure allowed it now to be modified to support ATM (not without some pain). How can you do anything but wish Axiowave good hunting and commiserate with those let go?
User Rank: Light Beer
12/4/2012 | 10:37:35 PM
re: Stealthy Startup Leads With Layoffs
Is there a market for software which models photonic switches? I am in the process of writing software to model photonic switches (those described in Scientific American, Jan 2001. pp. 80-92). The big question I have is with all the layoffs in the industry, is it possible to make a sale of the software? BTW, do photonics companies use their own internal software, or do they buy it from Ansoft or Infolytica? What aspects do they model? Just the mechanics, or even the physics interactions?

email http://deodiaus.tripod.com/deo...
User Rank: Light Beer
12/4/2012 | 10:37:27 PM
re: Stealthy Startup Leads With Layoffs
The concepts behind the Nexabit, as well as other Terabit router vendors technology was/is basically sound. The real problem is being able to implement it, and once having done that, having a market for it. The real problem was that the market for high bandwidth Internet services was itself a scam. The project growth of the Internet and the market for Internet services was pure hype to create maket value for companies' stock equity. There never has been a large market for high bandwith Internet services. MPLS people beware.
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