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Tahoe Tumbles On

Light Reading
LR Mobile News Analysis
Light Reading
9/30/2003

The financial muscle behind troubled wireless router startup Tahoe Networks insists the company remains primed for business, despite sources close to Unstrung confirming reports the vendor is functioning with only a skeleton staff.

Redpoint Ventures -- one half of Tahoe’s venture capital backers -- is maintaining a positive outlook on the company’s credentials. “We [Tahoe] are not out of business,” states Geoff Yang, partner at the VC in an email reply to Unstrung. “We believe that they have a terrific product and a small, but focused team.” [emphasis added]

Tahoe’s other VC, Accel Partners, was not available for comment.

The startup itself remains tight-lipped, refusing to comment on its future plans. “We are not speaking to any outside organizations at present,” says Ed Chang, VP product management and marketing. “I cannot say when we will be able to comment.”

Speculation over the startup’s health has been rife for weeks following a spate of layoffs and management restructuring, coupled with its ongoing failure to deliver on previous promises of customer announcements (see Tahoe's VP Roundabout, Tahoe Loses Bodies, and Tata to Tahoe?).

Analysts believe the company’s troubles stem from the failure of the wireless industry to provide enough data-driven applications to justify operators adding purpose-built mobile routing platforms to their infrastructures.

“The complement of mobile routers supplied by Cisco Systems, Nokia, or Ericsson/Juniper is good enough for the relatively light data loads experienced today,” warns Ken Rehbehn, principal analyst for wireless infrastructure at Current Analysis.

"Adding a new vendor and its equipment creates pain for the operators -- and the operator tolerates the pain only when a significant problem is getting solved." Rehbehn also doubts whether Tahoe will find an interested buyer for its assets, if the firm does go under. “The days of infrastructure companies buying startups to fill product gaps are long gone. Instead we will see partnerships such as that recently announced between Alcatel and WaterCove Networks. And even with good partnerships in place, operators will tend to look warily at solutions that are not quite mainstream." (See WaterCove Wins Alcatel.)

— Justin Springham, Senior Editor, Europe, Unstrung

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