Funding for startups

Innovance CEO: Layoff a 'Rebalance'

Innovance Networks has laid off 80 people, 27 percent of its present workforce, in what CEO Peter Allen calls a "rebalance" between needed resources and spending.

The layoff is the second big one to hit Innovance this year (see Innovance CEO: Layoff Was a Tuneup), telegraphing yet again the message that a recovery in long-haul technology spending is nowhere to be seen. In all, the company has cut about 31 percent of the 335 employees it had in January 2002.

"Clearly... market uncertainty in general has increased," Allen said. The outlook on carrier spending, he says, is murkier than it was even 45 days ago. And there's no immediate prospect that carriers will be investing in the kind of next-generation long-haul transport equipment Innovance has to offer -- at least for a few months.

In the meantime, Innovance must cope with the downturn. Its workforce reduction is an attempt to "rebalance," Allen says, matching up what the company needs to have in terms of staff resources right now against the level to which it needs to cut its cash burn rate.

Allen concedes that even more cuts may be needed, depending on the pattern of carrier demand. "We're prepared to act as we see market dynamics change," he says.

Innovance cut staff across the board in its Ottawa and Piscataway, N.J., facilities. Allen admits the hatchet fell heaviest on the company's manufacturing operations, which include folk involved in finishing and verifying switches that are manufactured by third-party fabrication plants.

Since Innovance shipped its first prototypes to carrier test labs in late May (see Vendors Aim to Cut Costs in Core), these kinds of finishing operations won't be required until customers that are now kicking the tires start ordering products for real. Innovance must wait on this feedback before it can even think about growing again.

Indeed, as Allen says, no other options are open. The funding door has closed, at least for now. Despite being able to score about $130 million in funding to date, including $55 million in February 2002 (see Innovance Scores $55M), Allen says Innovance can't expect more cash to come its way unless it's got paying customers -- and ones of the right ilk -- onboard.

"Everything is driven around real customer traction," he says. "If you show that, things you need will be available to you."

Innovance isn't alone in waiting for its ship to come in. Another well-funded Ottawa startup in the long-haul space, Ceyba Inc., has also felt the pain of layoffs and cutbacks (see Startups Adjust to Long-Haul Reality).

Startups such as Innovance have been hit hardest by the downturn because they specialize in core network capacity, where the most extravagant excesses of the boom era were focused. What's more, most next-gen equipment for core deployment will call for carriers to commit to a new network architecture that's different from their current, Sonet-based gear. So far carriers have balked at any such changes, as they drop all but the most urgently needed network renovations, which typically involve metro area networking gear.

But Allen thinks change is on the way. He remains "cautiously optimistic" that ongoing consolidation in the carrier market will encourage new investment in long-haul capacity by the end of next year.

By that time, he says, big carriers who've survived the current round of bankruptcies and restructurings will have absorbed some of their fallen competitors and will be ready to take the next step toward offering services to an expanded customer base. Then they'll see that it's more economical to invest in gear that's more scaleable and flexible, rather than tacking on more of the same old telecom kit.

"We think it will be the second half of 2003 before processes, including trials, lead to service deployments," Allen says.

— Mary Jander, Senior Editor, Light Reading
COMMENTS Add Comment
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opticalulcer 12/4/2012 | 9:49:16 PM
re: Innovance CEO: Layoff a 'Rebalance' I didn't think they had any products. Rumour has it that the product verification group got whacked heavily because they objected vocally to the crap coming out of the design team.

Anyone have the real scoop?
snarfulent 12/4/2012 | 9:49:15 PM
re: Innovance CEO: Layoff a 'Rebalance'
It seems a bit surprising to me that a
pre-revenue systems start-up carried a
head-count of over 300 people through
most of 2002.

Sounds like a lot of the optical start-ups
were put together by refugees from Lucent
and Nortel, and 300+ people sounded like
a lean, mean start-up team relative to
their past experience (wasn't that long
ago that a systems start-up never saw a
100 person head-count pre-revenue).

Their last funding is probably about to
run out because they carried along 300+
employees all year, and now they've got
no revenue, no new funding, and they're
carrying 200+ people to wait out the
drought until "second half 2003"?
With what money?

Looks like a "grab the first exit strategy
that can't outrun us" hail mary plan now
(just speculating...)
optical_pow 12/4/2012 | 9:49:13 PM
re: Innovance CEO: Layoff a 'Rebalance' I heard workforce reductions at PhotoneX, Innovance and Ceyba in the past several months. I think Xtera and Celion are also in the same long haul business. Any layoffs at these companies?. Looks like things are going well for Texas companies!

jamesbond 12/4/2012 | 9:49:13 PM
re: Innovance CEO: Layoff a 'Rebalance' There doesn't seem to be any noise on these two.
coherence 12/4/2012 | 9:49:11 PM
re: Innovance CEO: Layoff a 'Rebalance' Calient has cut to the bone a few weeks ago.
Elvis Doesn't Live 12/4/2012 | 9:49:10 PM
re: Innovance CEO: Layoff a 'Rebalance' Funny but if you do a spellcheck on email it will replace innovance with annoyance....

What were these dopes thinking anyway. LH has been dead for months and will continue to remain so. They should have cut their burn rate months ago. Besides, who needs a God box LH product?
BigBrother 12/4/2012 | 9:49:09 PM
re: Innovance CEO: Layoff a 'Rebalance' Innovance is a very political company and all the people from the top from CEO to directors and tech leads basically has zero startup experience (former Nortel and Siemens). They have been working like a big company, keep hiring more than enough people to do the jobs and expect things will move quicker.

Then the political fingers took over when times to get blame or hard, execution and direction from the directors and leads are non-existence or poor. Design is from bottom up, almost no architecture document from architects, when there is one, it is a joke.

I am not suprise that most of those got layoff are fall out from the political arena. Most of the time, half of the people has nothing or next to nil things to do due to political reasons. Innovance keeps having the mentalitiy that more people mean more money at IPO. I think the IPO dream is over at least for now.

It is a closed company, unlike the name, it does not like innovations, one the mind is set, forget it. I would be very suprise if the product actually worked. You will laugh when you see what they have done to the embedded software.
telco head 12/4/2012 | 9:49:09 PM
re: Innovance CEO: Layoff a 'Rebalance' Celion laid off nearly 50% 3 weeks ago.
Most of the cuts came from software.

Xtera seems to be moving along fine.

opticalguy 12/4/2012 | 9:49:08 PM
re: Innovance CEO: Layoff a 'Rebalance' Xtera may be fine now but WOW they've got to be burning the cash hard. Catered lunch and dinners every day, fitness facilities, child care at the facility with advanced cameras to watch the chirdren. Got to be blowing through cash.

Trucks for AT&T rolled out with product supposedly. Probably for testing at the gates.

Anybody got any comments and real G2????
edgecore 12/4/2012 | 9:49:03 PM
re: Innovance CEO: Layoff a 'Rebalance' ========
You will laugh when you see what they have done to the embedded software.

Don't keep us hanging BigBrother, what have they done with VxWorks that will make us laugh?

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