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Employment

Haleos: Final Days?

What does it take to save a company? In the case of optical sub-assembly manufacturer Haleos Inc., the answer is $15 million or more.

That's the amount that Haleos is seeking to raise from investors, according to Art Pumo, its VP of human resources. "We're in discussions with current investors and new investors, and we're hopeful of resolving the situation in the next two to four weeks," he says.

But sources close to the company say things don't look that hopeful at all. Haleos has reportedly been trying to raise money since last summer, and at the beginning of last week (February 25) it was forced to "furlough" 85 employees (Pumo's word), most of whom are still owed four weeks of pay. Only the executive team remains at the company.

So what's gone wrong?

At first glance, Haleos looked like a good prospect. Founded in 1996, the company had plans for an Aladdin's cave of optical sub-components and process technology. Its main business is making and selling fiber arrays -- silicon sub-assemblies with tiny grooves to hold fibers in position accurately. It also has its fingers in a number of other pies, including foundry services and the manufacture of ball lenses, lensed fiber tips, and other components for optical interconnects.

Haleos boasts that it has 160 customers in 15 countries. These most probably include JDS Uniphase Inc. (Nasdaq: JDSU; Toronto: JDU) and Newport Corp. (Nasdaq: NEWP).

The trouble was, apparently, that Haleos spread itself too thin. "Nothing really got focused attention. There's lots of stuff on the Website, but none of it ever got made," an ex-employee tells Light Reading.

A one-time customer of Haleos echoes this sentiment. "My take on their demise is poor execution. [Haleos] seemed like they were trying too many things. Selling fab services and selling devices... they should have picked one or the other."

The bottom line is that Haleos appears to have spent all their money. According to sources, it has burned through $22 million of investors' money since the spring of 2000. Haleos refuses to name its investors, however. "It's one of the conditions of negotiations that we didn't name them," says Pumo.

But the investors themselves aren't so coy. Court Square Ventures LLC, which is reportedly the lead investor, lists Haleos among the portfolio companies on its Website. In turn, it lists Newport, Vawter Capital, and Virginia Tech as the other investors.

Although Haleos hasn't actually filed for bankruptcy at this point, a former employee says it's only a matter of time. The company owes $13 million in secured debt, and upwards of $0.5 million in backpay, he says -- which goes a long way towards explaining the $15 million funding target.

If Haleos can't raise further investment, then it is unlikely to be able to pay its employees -- ever. "Money has to go to secured debtors first. Even if they auction off all the company's assets, it will not be enough to cover [the backpay] as well." — Pauline Rigby, Senior Editor, Light Reading
http://www.lightreading.com

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