The Zeugma Dilemma

12:10 PM Sometimes being early to market with a good idea can be a bad thing

September 23, 2010

2 Min Read
The Zeugma Dilemma

12:10 PM -- Was Zeugma Systems Inc. ahead of its time? Or is there such a thing as being too innovative in telecom? (See Zeugma Goes ZZZZZ...)

"A lot of people said we were ahead of our time, and it's certainly more self-satisfying to think that, because otherwise, you were just wrong," says Kevin Walsh, formerly VP of marketing for Zeugma, which closed its doors on Monday, putting its remaining 15 or so employees out of work. "We had a slightly different approach, and that did create some sales headwind."

What Zeugma tried to do was give wireline and wireless network operators an easy way to manage different types of traffic at the broadband edge, where that traffic had to find its way onto the Internet or content delivery networks. Given the growing tide of online video, it's safe to say demand for that kind of technology may soon be on the rise, and Zeugma certainly had its admirers. (See TelcoTV Announces Vision Award Winners.)

But Zeugma ran out of cash before its idea of using Deep Packet Inspection to do bandwidth management and create differentiated services at the edge of the broadband network caught on. The company had three independent telco customers but found that Calix Inc. (NYSE: CALX) and Occam Networks Inc. (Nasdaq: OCNW), both of which had been chasing the IOC broadband access market for much longer, were too entrenched, Walsh says.

Zeugma's investors declined to dig deeper to keep the company going, after pumping in about $50 million. (See Zeugma Gets $9M.)

"The reality of the IOC market is that those customers only need one [broadband access vendor], and building meaningful revenue volume in that space turned out to be a bigger challenge than we thought," Walsh told us.

CEO and founder Andrew Harries continues at the company to sell its intellectual property and assets, according to Walsh.

Walsh still believes that Zeugma's basic premise holds and that broadband network operators, both wireline and wireless, will be looking for intelligent traffic management solutions sooner rather than later -- just not soon enough to save Zeugma.

— Carol Wilson, Chief Editor, Events, Light Reading

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