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Tenor Goes Silent

Light Reading
News Analysis
Light Reading
2/28/2003

While analysts debate whether or not the telecom industry has hit bottom yet, more startups are throwing in the towel (see Lehman: Worst Over for LU and NT). This week, Tenor Networks Inc., a core MPLS switch maker, is among the latest to shut down.

“Some of the startups in the class of '99 and '00 are running out of time,” says Kevin Mitchell, an analyst with Infonetics Research Inc.

Recently, Light Reading has noticed a rash of companies closing their doors for good as they run out of cash. Last week, Headcount reported that AirFiber Inc., the free-space optics startup funded by Nortel Networks Corp. (NYSE/Toronto: NT), had shut down (see Headcount: Good News, Bad News). AraLight Inc., an optical components maker, has also closed up shop.

Tenor management issued this note on the shutdown:

    As of Wednesday, February 26, 2003, Tenor Networks will suspend operations and will begin an orderly process of permanently closing the business. A core technical engineering team will remain engaged for some time in order to maintain and support key Tenor technological and product assets as the company evaluates the sale and transfer of Tenor’s products and technology.
Tenor had originally planned to build an IP/MPLS switch for service provider core networks. The product, conceptualized in 1998, was designed for large carriers that were moving toward Multiprotocol Label Switching (MPLS) cores. Back in 2001 the company was testing gear with Global Crossing Holdings Ltd., Qwest Communications International Inc. (NYSE: Q), and WorldCom Inc. (OTC: WCOEQ), according to a former employee. Nice trial roster, eh? As those carriers fell on financial hard times -- with two of them filing for bankruptcy -- Tenor’s prospects fizzled.

Despite this spate of bad luck, Tenor managed to generate a small amount of revenue. The company had supposedly had a small deal with AT&T Corp. (NYSE: T). It had also sold some of its ASIC technology to Mindspeed Technologies, for which it had been collecting royalties until Mindspeed discontinued its project.

Tenor's big problem was positioning. Core routers from companies like Cisco Systems Inc. (Nasdaq: CSCO) and Juniper Networks Inc. (Nasdaq: JNPR) had already begun incorporating more MPLS functionality onto their platforms, rendering the TN250 obsolete before it was even ready to be sold. Although many incumbent carriers, including the regional Bell operators (RBOCs), had already begun deploying Internet Protocol (IP) and MPLS in parts of their networks, these carriers were looking for equipment that could help them migrate existing Asynchronous Transfer Mode (ATM) services onto an MPLS backbone gradually.

Tenor tried to change with the times. It began developing a smaller edge router. And most recently it had begun working on a metro Ethernet product. Details of these products were never released, says Mitchell of Infonetics.

Since last year, the company has been involved with metro Ethernet standards organizations. Its engineers helped sponsor and develop standards in the Provider Provisioned VPN (PPVPN) working group of the Internet Engineering Task Force (IETF). This group is developing a standard for VPLS, an Ethernet-based multipoint MPLS VPN offering.

“I think that Tenor was a little ahead of its time,” says one former employee. “But in terms of the Ethernet product, I think it was a little behind the market.”

The company had 152 employees at its peak. On its final day, the company had 63. Since 1998, the company had raised $120 million from venture backers like North Bridge Venture Partners, Matrix Partners, and Greylock. Although the company wouldn’t give an official figure, a spokesperson says the company still has cash in the bank.

According to former employees, they were all given severance packages.

“People are definitely sad it's over,” says a former worker. “But I think everyone knew it was coming. Dave Tolwinski [president and CEO] handled everything with the utmost respect.”

— Marguerite Reardon, Senior Editor, Light Reading
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optigirl
optigirl
12/5/2012 | 12:32:18 AM
re: Tenor Goes Silent
http://www.lightreading.com/do...

Guess the Tenor vision (used in this PR piece) never materialized.

;-)

reoptic
reoptic
12/5/2012 | 12:32:15 AM
re: Tenor Goes Silent
VCs are now going into startups with cash and pulling the plug before the spend too much. Tenor and Celox for example exited with cash still in the bank. The vc angels have become 'angels of death' so they can rescue their prized cash before it is too late. Many more companies to follow this path.
woodhead
woodhead
12/5/2012 | 12:32:15 AM
re: Tenor Goes Silent
They are doing pretty close product. Actually Vivace was not a reason for Tenor's death ( Vivace guy may say: see, our competition kills them. We are better.), but today's market did it. MPLS is dead! Nobody is a superman.
MaxQoS
MaxQoS
12/5/2012 | 12:32:09 AM
re: Tenor Goes Silent
My personal opinion is that the Tenor switch was ahead of its time in terms of hardware features at least with respect to Cisco and Juniper but was also unable to successfully differentiate itself on software features again WRT the aformentioned competitors. That and, of course, the telecom depression completely killed off the MPLS market.

In any case, you have to give Tenor's senior management credit for getting the VC's to fund a severance package for all of the employees as the ship sank beneath the waves.

Bon chance Tenorites!

Max
WiserNow
WiserNow
12/5/2012 | 12:31:58 AM
re: Tenor Goes Silent
Definitely give management credit for negotiating a severance package -- perhaps that is why they exited with cash in the bank.

It would be interesting to hear what the severance package was. Unused vacation cashed out? Vacation pay + 2 weeks?

The old standard of 2 weeks minimum + a week per year of service seems to have been weakened during this downturn. What will the new standard be?
grapsfan
grapsfan
12/5/2012 | 12:31:33 AM
re: Tenor Goes Silent
> VCs are now going into startups with cash and
> pulling the plug before the spend too much.
> Tenor and Celox for example exited with cash
> still in the bank. The vc angels have
> become 'angels of death' so they can rescue
> their prized cash before it is too late. Many
> more companies to follow this path.


Well, yeah, cash is prized. You say that like it's a terrible thing. It's terrible that 63 people are losing their jobs in a business where its unlikely that any will be available for them. I don't know anyone at Tenor, but I've lots of friends in similar positions, and understand the toll that this situation puts on your life.

But the VCs put $120 million into a company that over 4 years had just three "lab trials" (with Qwest, that typically just meant that they'd put the NE in a building and apply power to it). As LR pointed out, all three of those trial companies are now bankrupt or close to it. No verified announced customer, no clear revenue stream.

If I was an investor with North Bridge, Matrix, etc., I would be PO'ed if they didn't get me some of my money back. There comes a point where the investors are throwing good money after bad. Any decent poker player can tell you that it's better to cut your losses and wait for the next hand when you can't win.
exObserver
exObserver
12/5/2012 | 12:31:27 AM
re: Tenor Goes Silent
Has anyone heard if Xalted Networks is still alive and kicking. Last I heard they were in chapter 11 and had only 6 employees.

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