Optical/IP Networks

The Top Ten Movers and Shakers in Optical Networking

Turnaround Time

Dan Smith 2001 is turning into a crap year for Dan Smith.

It’s a far cry from 1999, when Smith and longtime cohort, Sycamore Networks Inc. (Nasdaq: SCMR) founder and chairman Desh Deshpande, launched one of that year’s – actually, that decade’s – most astounding IPOs. In contrast, Sycamore’s year thus far has brought a sales shortfall, layoffs, and a monster pileup of unused inventory, all capped with horrendous second-quarter results (see Sycamore Drops a Bomb). This has prompted investors to take a chainsaw to Sycamore’s stock price. Now, all that’s left of this once magnificent tree is an awkwardly pruned shrub. Can Sycamore sprout new growth?

The recent turmoil at Sycamore has raised the level of skepticism on Wall Street. One fund manager (and a large holder of Sycamore stock) recently remarked that several elements of the recent debacle reminded him of a certain quarter at Cascade Communications. That bad quarter blew out Cascade's stock price and eventually contributed to the decision to sell the company to Ascend Communications Inc. The price that Ascend paid for Cascade? $3.7 billion. Sycamore’s market cap as of 5/29? $2.8 billion. Hmmm...

Smith and Deshpande have said they are steadfastly against selling Sycamore – and regret the sale of Cascade. They also have more control in Sycamore, owning more shares in the company between the two of them than any other single investor.

This sets the stage for Dan Smith’s career evolution: Can he develop the chops of a turnaround artist at a large public company? If not, he may cement a reputation as a CEO who has mastered the art of an IPO but struggles with handling the difficulties facing large, maturing companies.

Smith stays on the list because he has a lot to prove and a record of getting particularly tenacious when the times require. His public declarations indicate he’s committed to the turnaround. He also has the tools at his disposal. Sycamore still has a promising technology roadmap, technical talent, and a interesting software platform – and $800 million in cash and short-term marketable securities in the bank. With loyalists on the board, it’s not likely Dan’s going anywhere soon.

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