Zaffire May Have a Buyer
The suitors? Possibly Ciena Corp. (Nasdaq: CIEN) or Marconi Communications PLC (Nasdaq/London: MONI), according to sources. The price range? $200 million to $300 million.
Ciena and Marconi officials had no comment. Zaffire had not returned calls at press time.
Zaffire has struggled lately, as sales efforts have faltered and the company has been forced to lay off staff and reorganize (see Zaffire Fires 20% of Sales Team and Zaffire Gets Zapped). The company has also gone through a power struggle and shuffled chief executives (see Zaffire Keeps It in the Family , Zaffire Names New CEO, Christ Comes to Zaffire, and Zaffire Zaps Marketing VP ).
At least one venture capitalist commenting on a potential deal said that a price range of $250 million was appropriate -- maybe even a little high -- for the company in the current market. Other struggling optical networking startups have met worse fates (see Mayan Buys Ticker Symbol and Atmosphere Comes Back to Earth). But if the company is sold for roughly $250 million, it's not likely to make anybody rich. Most optical networking startups funded last year received valuations over $500 million.
Other factors may be driving the sale of Zaffire. Vinod Khosla, the Kleiner Perkins Caufield & Byers VC who funded Zaffire, is now on sabbatical and may be looking to close the loop on his optical portfolio. Another investor, the publicly held optical incubator MRV Communications Inc. (Nasdaq: MRVC), might be looking to raise cash from the transaction.
Although Zaffire officials have denied the company is for sale in the past (see Zaffire: 'We're not for Sale'), Silicon Valley sources said the company has been actively shopped around.
Even though it has had trouble gaining significant customer accounts, Zaffire's DWDM (dense wavelength-division multiplexing) equipment might be attractive to some large companies looking to plug holes in their optical portfolios (see Zaffire Announces DWDM for Metro Networks). Although Ciena recently purchased Cyras Inc. to make a move into metropolitan networks, Cyras is focused on Sonet technology, rather than on DWDM. The recent success of DWDM metro player ONI Systems Inc. (Nasdaq: ONIS) and aggressive moves into the metro DWDM market by Cisco may give competitors reason to boost their metro DWDM technology offerings.
-- R. Scott Raynovich, Executive Editor, Light Reading