Optical/IP Networks

TiMetra for Sale?

The buzz in Silicon Valley is that edge routing startup TiMetra Networks is on the verge of closing a deal to be acquired by a large incumbent equipment provider.

Who’s buying? That’s the big mystery. Alcatel SA (NYSE: ALA; Paris: CGEP:PA), Siemens AG (NYSE: SI; Frankfurt: SIE), and NEC Corp. (Nasdaq: NIPNY) have all been mentioned as potential acquirers.

If TiMetra can pull off this deal, it will be the third telecom startup acquisition in less than two months -- the second in a week, if it’s announced in the next few days. Ciena Corp. (Nasdaq: CIEN) got the ball rolling last month when it acquired WaveSmith Networks Inc. (see Ciena Nabs WaveSmith). And yesterday Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA) announced it would acquire Vivace Networks (see Tellabs Snags Vivace for $135M).

According to one source, the TiMetra deal is valued at well under $100 million. Compare that to acquisition price tags in 2000: Lucent Technologies Inc. (NYSE: LU) spent about $4.5 billion on Chromatis, and Alcatel’s bid for Newbridge Networks was valued at about $7.1 billion (see Lucent Catches Chromatis).

But those valuations came in the topsy-turvy world of the bubble. During the telecom drought, any cash TiMetra can get is a good deal. The company, which has not yet announced a product, has only raised about $23.6 million in its first and only funding round, according to Venture Economics. Accel Partners and Redpoint Ventures, along with an unnamed “strategic partner,” were the original investors (see Timetra Trumpets Its Edge Router ).

According to several sources, TiMetra’s product still isn’t finished, and some speculate it could take another $20 million in cash to complete development and ramp up production. But investors are nervous about sinking more money into the company, because of the market uncertainty. They’re also leery of bringing in outside investors, for fear of diluting their holdings in a recapitalization. As a result, they’ve been looking for a buyer, say the sources.

About a year ago, the startup supposedly approached Cisco Systems Inc. (Nasdaq: CSCO) about a potential acquisition, but Cisco wasn’t interested. Cisco typically does not acquire routing startups. Instead, its policy is to acquire startups with technology that can be integrated into its existing routing code.

If Cisco's brushoff stifled TiMetra's efforts, the recent flurry of telecom acquisitions, along with the highly anticipated partnership between Lucent and Juniper, seems to have gotten them going again.

Alcatel seems to be the lead contender at the moment. Analysts covering the sector say it makes sense.

“Some people within Alcatel may claim they have an IP edge box, but they really don’t," says Kevin Mitchell, directing analyst with Infonetics Research Inc. “In fact, Alcatel has already acknowledged at a high level that they need some sort of IP edge device.”

Alcatel has the 7770 IP core router and the 7670 Routing Switch Platform IP/MPLS router. According to Mitchell, who tracks the core and edge IP router market, the closest Alcatel has come to having a true IP edge box was a product it acquired from Newbridge Networks. That product actually came out of Newbridge’s 1999 acquisition of Northchurch Communications. The Northchurch box offered IP VPN functionality. But after two years of being tossed around within Alcatel, the product was eventually cancelled, says Mitchell.

“Now they don’t have an IP edge play at all,” he adds. “At least, they don’t have one that they’ve been talking about.”

Siemens is also said to be eyeing TiMetra. The German telecom equipment giant currently has a partnership with Juniper Networks Inc. (Nasdaq: JNPR), which evolved from the sale of its U.S. networking subsidiary, Unisphere Networks, to Juniper last summer (see Juniper Nabs Unisphere for $740M).

But the recent Juniper/Lucent partnership may have rattled Siemens's cage a bit, say some sources. In addition to Lucent, Juniper also has reseller agreements with LM Ericsson (Nasdaq: ERICY) and Nortel Networks Corp. (NYSE/Toronto: NT).

“I think that Siemens might be kicking themselves for giving up Unisphere,” says one venture capitalist, who didn’t want to be named. “It’s now one of the leading edge router platforms on the market, and it’s being sold by everyone. There’s not much differentiation for them.”

If nothing else, the TiMetra rumors reflect the growing importance of the multiservice edge, which is taking center stage these days as carriers migrate their networks toward converged IP/MPLS backbones.

SBC Communications Inc. (NYSE: SBC), Verizon Communications Inc. (NYSE: VZ), and Qwest Communications International Inc. (NYSE: Q) have all announced plans to build IP/MPLS backbones (see Qwest Heads for Convergence). BellSouth Corp. (NYSE: BLS) announced just yesterday that it has completed its in-region MPLS network (see BellSouth Unveils MPLS Backbone). Large interexchange carriers, like AT&T Corp. (NYSE: T) and Sprint Corp. (NYSE: FON), are also converging their networks.

TiMetra did not return calls by press time; Alcatel declined to comment.

— Marguerite Reardon, Senior Editor, Light Reading

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regent 12/5/2012 | 12:04:00 AM
re: TiMetra for Sale? In fact, Timetra went through two funding rounds. Inaccuracy? More like a blunder :) you don't need to have "sources" to know that, just an internet connection. This information is available at www.timetra.com.

Regarding the completion of their product, I happen to know that they have shipped for revenue.
joe_average 12/5/2012 | 12:04:00 AM
re: TiMetra for Sale? Title says it all.

Why is this news? Is a deal imminent?
M$BIG 12/5/2012 | 12:03:58 AM
re: TiMetra for Sale? Interesting... I missed the info on the Alcatel/TiMetra relationship. Can you point me to it? Which Alcatel Unit is involved? Data or Access? - M$
alcabash 12/5/2012 | 12:03:58 AM
re: TiMetra for Sale? It will be interesting to see how Alcatel can integrate Timetra after their repeated failures.
Rumor is that they were looking at Procket, what a joke! At least, Timetra seems close to having a decent product.
alcabash 12/5/2012 | 12:03:57 AM
re: TiMetra for Sale? Data (ex-Newbridge) + Belgium (ADSL)
It's the same group now.
M$BIG 12/5/2012 | 12:03:57 AM
re: TiMetra for Sale? Thanks. It has been my experience that borgs, unless there is an immediate feature/solution demand (which I do not see with TiMetra), try the OEM route, assign a PLM, etc....

With the number of ex-Nortel folks there, perhaps they are the borg... M$
Kevin Mitchell 12/5/2012 | 12:03:56 AM
re: TiMetra for Sale? Shipping for recognized revenue? I doubt that. Even TiMetra employees admit that they are still in production mode and trials.
BobbyMax 12/5/2012 | 12:03:52 AM
re: TiMetra for Sale? It is hardly one hears a start-up with no products promoting itself to be bought. The trend of selling start-ups without any product is certainly a very recent undertaking. It is extremely important that thee buyers be aware of this tricky company from California. Many companies have sinked to the bottom of the ocean when they acquired a high tech copmpany located in Californias. It is a big stunt being pulled by TiMetra.

It appears that is crooked mamagers want to sell the company so that theycan prolong their tenure with a company that buys TiMetra.

It is very hard to tell which company would fall under the clutches of TiMetra.
Holy Grail 12/5/2012 | 12:03:51 AM
re: TiMetra for Sale?
If the rumour is true that they are about to close a deal, then this reminds me of the good old bad old days.

Can anyone actually still fall for the old "The hardware is done, it's just the software that's not quite there" story, amazing!

A word to the wise. Don't believe them!

The software is actually the hard part and until you have the software working properly how do you know the hardware works anyway?

IMHO TiMetra are a bunch of hardware guys who know a bit about network processors, the rest is hype and spin (and boy they do a good job of this for sure). Anyone who buys these guys is being fooled and will regret it, I'd put money on it.

This industy is littered with these sort of hype driven bad deals, are folks memories really that short? I think Juniper's aquisition of Unisphere's BRAS Edge platform was a smart move, now lets consider Ericsson and Torrent, Nokia and Amber, Lucent and Springtide....

The acid test of a good IP company with a real solid product is to see the product actually deployed in a large scale IP network standing shoulder to shoulder alongside Cisco and Juniper, believe me, it's real easy to do in Powerpoint but by god its hard to do in the real world. (And watch out for the customer CTO or key decision maker being bribed with stock of sitting on the start-up's board, or some other dodgy financial sweetner).

Buying a start-up who has actually achieved real depolyment in a big IP network, well this is a good place to start and then provided you are prepared to pay sensible money that recognises the achievement, then you will likley get what you want a great deal and rapid entry into a fast growing market. Trying to get it on the cheap or thinking that you are smarter than the average bear will end in disaster for sure.

Any of the large players looking to move into the IP space and go up against Cisco and Juniper should look at Avici in the core space, they are deployed for quite a while in AT&T core, and Laurel also deployed by Level(3), both have next gen architectures, both have proven that they know what they are doing and with a big brother both could give Cisco and Juniper a major headache.

Anyone care to comment?

Just my 2 cents rant rant

Peter Heywood 12/5/2012 | 12:03:49 AM
re: TiMetra for Sale? I've looked on Timetra's website and I can't find the info you're refering to. The "company" page merely states that it's received funding from 2 VCs. It doesn't say 2 rounds.
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