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Lights Dim at Latus

Light Reading
News Analysis
Light Reading
9/18/2001

Latus Lightworks Inc. will have to shut its doors unless it can find a buyer this week, the company says. Latus, which makes long-haul DWDM equipment for service provider networks, was unable to find a lead investor in its second funding round so it has until the end of the week to find a buyer before it runs out of money, says Frank Puglia, group director of corporate marketing for the company.

"We have great people, great technology, and great customer interest," Puglia says. "We've met our milestones and we've been under budget, but we've just run out of money."

To their credit, Latus managers told its employees a week ago that its future was uncertain. The announcement was made after a last minute attempt to secure a lead investor failed last Tuesday.

Now the company might go out of business, leaving its 125 employees jobless and without a severance check. But it might also find another company to buy its intellectual property, which would likely include Latus' core staff. "At this point we're encouraging people to cultivate their contacts and to be prepared for the worst while hoping for the best," says J. Michael Dugan, the company's founder and chief technical officer.

"Let me put it this way: the only thing my printer is printing this week are resumes," one Latus employee told Light Reading.

Latus, which was founded in March 2000, has received about $28.1 million in funding to date. The company started looking for additional funding in June, a little more than a year after it had closed its first funding round. While the company says it had several investors willing to commit more than $5 million a piece in new capital, what it lacked was an investor willing to put in $10 million to $15 million as a lead for a $30 million round.

As recently as a month ago, Latus managers say its investors and financial advisor - said to be Morgan Stanley Dean Witter & Co. - all provided their assurances that the company was on track and would be able to get the financial assistance it needed. Latus' investors include Hook Partners, Mayfield Fund, Sevin Rosen Funds, and Lightspeed Venture Partners (disclosure: Lightspeed is an investor in Light Reading). Dugan, Metera CEO H. Michael Zadikian, Sevin Rosen partner Jennifer Gill Roberts, Mayfield Fund's Todd Brooks, and Lightspeed's Barry Eggers sit on Latus' board.

As market conditions progressively worsened, investors began to pull back.

Latus was one of The Iris Group startups, a band of companies cofounded by Zadikian, who started Monterrey Networks. The other Iris startups include metropolitan optical equipment maker Metera Networks Inc., Iris Labs, and core switch maker Coree Networks Inc.

Last month, Light Reading reported that Coree was met with a similar fate as Latus -- it had all but completely ceased operations after it couldn't find funding (see Coree Cuts Back).

Though they were formed and funded separately, the Iris Group companies promoted a common network vision -- dubbed the Optical Data Network Hierarchy (ODNH) -- and common network management software. The gist of ODNH is that the core stays dumb and fast, network intelligence remains at the network's edge, and wavelengths are handled in larger groups so they're easier to manage (see Iris Group Shuffles Executives and Iris Group Unveils Network Architecture). While each product sold by each company is independent, there were supposedly operational advantages to be found by using more than one kind of product in the same network.

Latus, which was on track to ship a 2.56 Tbits/s DWDM system by mid 2002, was a crucial part of the Iris Group's network vision. Service providers had not yet begun testing Latus' product, but the company's managers insist that its technology was in good working order. "Our situation is purely a reaction to the economic climate and our inability to secure funds," Puglia says.

- Phil Harvey, Senior Editor, Light Reading
http://www.lightreading.com

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lightmaster
lightmaster
12/4/2012 | 7:50:20 PM
re: Lights Dim at Latus
The whole marketing spin on the Iris Group was that they were creating an end-to-end solutions with the individual portfolio companies. Given that the ends are falling off one by one, what's the value of the remaining pieces?
^Eagle^
^Eagle^
12/4/2012 | 7:50:20 PM
re: Lights Dim at Latus
It is not surprise. Look at the "success" rate at the founders former positions. Dugan's responsibilities at Alcatel were all taken back by Alcatel France. The team was late to market with DWDM products, and lost market share. Alcatel did not buy his vision of the network and he left. Zadikian lead the fiasco at Monterey that Cisco overpaid for....a company with no real product.

Is it any surprise that under these tough times, folks would be unwilling to continue to fund highly risky ventures. And Latus claims were pretty over the top. Bigger more sophisticated firms have not pursued their vision or methods. One has to wonder. And others in LH space have recieved significant funding (Innovance, Solinet, Photuris, PhotonX). One has to beleive that if Latus REALLY had what they claim, they would have gotten funding.

sailboat.
BlueWater66
BlueWater66
12/4/2012 | 7:50:19 PM
re: Lights Dim at Latus
I know a number of the engineers who work at Latus. They have some very talented people. I would be shocked to see it completely close down. A "white knight" buyer would end up with a valuable asset at a good price.

Latus would seem like an ideal purchase for Ciena! It would fill out their long-haul product line.
pkbo
pkbo
12/4/2012 | 7:50:19 PM
re: Lights Dim at Latus
Iris Lab could be the next very soon.
Rockhead
Rockhead
12/4/2012 | 7:50:19 PM
re: Lights Dim at Latus
let me guess, you are one of those "very talented people" still "working" at latus?

ciena is way too smart to pick up this hairball.
Metadata123
Metadata123
12/4/2012 | 7:50:18 PM
re: Lights Dim at Latus
Zadikian and his friends attempted to hustle some moronic VCs to create 4 worthless shells each one of which are disappearing right before our eyes. Cisco had internally deemed Monterrey their most worthless acquisition. After fooling Cisco with Monterrey, the gang had decided to take some VCs for a ride. It is a triumph of capitalism that such valueless enterprises meet their end at the earliest.

About Latus and the talent they have: Are you out of your mind? Those who have interacted with any of those guys have a very low opinion of the technical folk. And to top it all, the CEO was someone who had failed at almost everything he did at Nortel before Latus bailed him out.

In retrospect, maybe the elimination of crud is one of the few good things that is coming out of all this.
dodo
dodo
12/4/2012 | 7:50:16 PM
re: Lights Dim at Latus
Amen!

wrt the Nortel stars, these are the people who were in the right place at the right time. After their "expat" time was over, they came back home to try to exploit other avenues.

It's funny to read that they are all experts in Optical and they have introduced or launch so many novel products. Be humble for God's sake. Don't inflate your credentials when you don't even know the basics of fiber optics!!!
Bill Johnson
Bill Johnson
12/4/2012 | 7:50:08 PM
re: Lights Dim at Latus
They are not smart enough to pick up their stock though. Are they?
raman
raman
12/4/2012 | 7:50:08 PM
re: Lights Dim at Latus
Couple of freinds of mine in the industry had told me 3-4 months ago that LAtus was headed for a disappointing end. Turned out to be true....

At supercomm last June- Iris group tagline was "40G is for Sissies"- that was in some ways an indication of how far away from reality these guys were.
saber
saber
12/4/2012 | 7:50:07 PM
re: Lights Dim at Latus
Does anyone know whatever happened to Aetian Networks?
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