Galazar Garners $15.4M
It's the company's second round of funding, bringing its total haul up to CDN$33 million (US$22.4 million). Participants in the latest round included initial investors Katsura Investments, Skypoint Capital Corp., and VenGrowth Capital Partners (see Galazar Networks Opens With $11.2M ), along with new investors Desjardins Venture Capital Group, Goldman Sachs & Co., and RBC Capital Partners.
The money should carry Galazar through volume shipments of its flagship product, the MSF250. "We need about half of [the new funding] to become cash-flow-positive, and the other half is buffer," says CEO Richard Deboer.
The money won't be used for staff expansion, however. "We're sitting at 35 right now, and by the end of the year we're hoping to be at about 40," he says.
The MSF250 is a multiservice framer for the Sonet/SDH market, mapping plesiochronous [Gesundheit!] digital hierarchy (PDH) services such as DS1s and DS3s into Sonet pipes (see Galazar Unveils Multiservice Framer). The chip is due to start sampling this quarter, with volume production slated for the fall.
It's a long way from Galazar's initial ambitions to build a core switch -- all of it, not just the chips. About one year ago, the company changed plans on two levels, focusing on the edge and becoming a chip vendor.
Neither change was that traumatic, Deboer says. Galazar was populated with ASIC experts, many of whom had worked in telecom for 15 years or more. The staff did have to give up the glory of working on high-numbered OC interfaces, but the promise of real design wins eased that transition.
"It's really the more traditional technologies that have all the volume," Deboer says.
The strategy isn't lost on others. Agere Systems (NYSE: AGR/A), having just sold its optical business (see TriQuint to Acquire Agere's Optics), used the recent OFC Conference to showcase its MARS (Multi-Application and Rate Solutions) framers and other chips directed at lower-speed telecom applications.
The slower legacy interfaces are "probably the least understood today," says Chris Hamilton, MARS marketing director. In previous jobs, Hamilton worked for Williams and WorldCom Inc. (OTC: WCOEQ), helping equipment makers understand the carriers' needs, and he says the access protocols are peppered with subtleties that aren't always handled properly.
"If you're talking about sex appeal, then it's problably easier to talk about the Sonet stuff. But people are still installing T1 lines," says Hugh Wright, director of marketing for Exar Corp. (Nasdaq: EXAR). "The Sonet stuff needs to come from somewhere."
The next step for Galazar -- and for others in this space -- is to beef up emphasis on Ethernet over Sonet. Part of Galazar's funding will go towards successors to the MSF250 that will offer different permutations of Ethernet and access interfaces.
Galazar's primary competitors include Applied Micro Circuits Corp. (Nasdaq: AMCC) and PMC-Sierra Inc. (Nasdaq: PMCS). Another competitor is TranSwitch Corp. (Nasdaq: TXCC), which has filed a patent-infringement suit against Galazar (see TranSwitch Sues Galazar). Deboer says the charges have "no merit" and that his company intends to fight the suit.
— Craig Matsumoto, Senior Editor, Light Reading