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Optical components

Is TeraConnect Wrecked?

They aren't using the word "hibernation," but parallel optics vendor TeraConnect Inc. is doing something close, having laid off all but one full-time employee.

The one-man show is John Langevin, vice president of marketing, who's become caretaker to the company's remaining cash and intellectual property. His job is to scout for new markets, possibly collect royalties on patents, and wait for the time to "relaunch or somehow refocus the business," he says.

It's not as if Langevin is working from home in a bathrobe. TeraConnect did vacate its Nashua, N.H., headquarters, but the company sees enough activity to maintain a small office in Concord, Mass., which Langevin shares with part-time legal and financial help. And he still attends customer meetings and board meetings.

"We weren't ready to work out of a closet yet," Langevin says.

Langevin stresses that TeraConnect has not shut down, despite appearances. Its original phone number is disconnected, and its Website -- which vanished for a while -- is trimmed to one page.

TeraConnect -- like fellow New Hampshire firm Xanoptix Inc. -- was developing "2D" arrays of Vertical Cavity Surface Emitting Lasers (VCSELs), packing 48 or even 72 of them into one module (see TeraConnect Ships 120 Gbit/s Modules and Xanoptix Lands Cash, Launches Product). But earlier this year, TeraConnect's board decided no near-term revenues were coming and opted to slim down.

It's hard not to view the strategy as hibernation -- preserving cash while waiting out the downturn (see Bear Market Inspires Hibernation). Many companies have gone this route, working on the assumption that they've got the goods to succeed and are stymied only by an uncooperative market. Once the economy improves, so the theory goes, the company can pick up where it left off.

But hibernation has its problems (just ask Ted Williams, whose cryonically frozen head has cracked in 10 places, according to this week's Sports Illustrated). By the time the startup revives, its product could be replaced by something cheaper and simpler. Moreover, a startup out of action risks missing potential business (see Supercomm Shocker).

Unlike some hibernating firms, TeraConnect hasn't terminated its marketing. In addition to maintaining contact with customers, Langevin is seeking new avenues for TeraConnect's 16 patents, most of which involve hybrid integration -- the combining of disparate semiconductor parts into a single package.

During the bubble, the technology was celebrated as a way to combine electrical and optical functions into one device, but the concept has other potential applications, such as optical chip-to-chip interconnect. Xanoptix, which has similar technology, is hoping to sell hybrid integration as a foundry service for semiconductor firms (see Xanoptix Hatches Hybrid Strategy).

Other TeraConnect patents related to VCSELs and optical detectors could apply to components for CD-ROM and DVD drives, Langevin says.

Langevin won't specify how much cash TeraConnect has, other than to say its enough "to keep this thing running for another year-and-a-half."

TeraConnect was spun out of Lockheed Sanders Inc. in 2000, with $40 million in funding from Goldman Sachs & Co., Kodiak Venture Partners, and Spectrum Equity Investors (see Lockheed Spins Off Transmitter Startup). Xanoptix was founded around the same time, reportedly by investors who'd been shut out of the TeraConnect deal (see Xanoptix's Strange Story).

At its peak, TeraConnect employed 35.

— Craig Matsumoto, Senior Editor, Light Reading

zettabit 12/4/2012 | 11:35:31 PM
re: Is TeraConnect Wrecked? "he [John Langevin} still attends customer meetings"

Does that means he says customers "I can take your order, and since the company no longer has employees the delivery lead times may be a little longer than expected".

or....

"Langevin won't specify how much cash TeraConnect has, other than to say its enough "to keep this thing running for another year-and-a-half.""

Since he (Langevin) is the only employee, does that imply that the company has enough cash for, say, maybe 1 1/2 years of salary for an inept marketing vice-president?

And doesn't being the only employee sort of make you the de facto CEO?

BobbyMax 12/4/2012 | 11:35:30 PM
re: Is TeraConnect Wrecked? TeraConnect is a big joke. It does not have any substantial IPs. Many start-ups file bogus patents to raise money and increase the networth of the company. The technique is nothing new.

The marketing guy just wants to stay on the payroll till the last penny is spent?
litebite2003 12/4/2012 | 11:35:16 PM
re: Is TeraConnect Wrecked? "And he still attends customer meetings and board meetings."
Who is Langevin trying to fool?? This is a man who left the company months ago because his he saw the writing on the wall, and only came back because he couldn't find a job anywhere! If the company had a product to sell then the company would still be alive. Why would he say he's still visiting customers?? If they wanted a product, Teraconnect couldn't deliver it anyway. It's not like they ever built up an inventory. I don't believe there is enough money in the world to convince the engineers that built the product to ever return to Teraconnect. The CEO George D. used the excuse that the market was slow, rather than face the fact they had one of the worst management teams in the industry. Rather than refocus their direction, they chose to run it into the ground full steam ahead. If the market was so bad how did Xanoptix succeed? Even as the ship sinks they can't admit to their mistakes, I guess it's easier to blame it on the market!! Must be nice to get pay for 1 1/2 years to do nothing, oh wait a minute, I heard that's what he did for Teraconnect when he worked there before!!
beachboy 12/4/2012 | 11:35:14 PM
re: Is TeraConnect Wrecked? This is the best thread ever.
litebite2003 12/4/2012 | 11:35:13 PM
re: Is TeraConnect Wrecked? Nothing but the truth!
Soup 12/4/2012 | 11:34:36 PM
re: Is TeraConnect Wrecked? $40M in 3 years with (max) 35 employees? Wow, would I like to talk to THOSE investors (I have this idea, see, where you buy all the water in the oceans, then horde it, you see, and create a global water shortage. yeah, then you can sell the water back to the world at a great ROI).
smokymirror 12/4/2012 | 11:33:39 PM
re: Is TeraConnect Wrecked? Regarding your idea for water....
you should check out the book 'Blue Gold' which is all about how several international companies have already done exactly what you are proposing with fresh water.
smokymirror 12/4/2012 | 11:33:38 PM
re: Is TeraConnect Wrecked? Is Xanoptix succeeding or do they just have dumber investors than Teraconnect?
Didn't their CEO jump ship recently?
bluechip 12/4/2012 | 11:33:14 PM
re: Is TeraConnect Wrecked? What's up with ARALIGHT ?

I heard they are being sold for their Technology ?

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