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Mahi and White Rock: Just Good Friends

Access equipment maker Mahi Networks Inc. acknowledged Friday that it has been working on a technology solution with White Rock Networks. Both companies, however, deny recent rumors that Mahi is close to acquiring White Rock.

"We have been working with White Rock on a very specific application for a very specific customer," specifies Ron Longo, Mahi's VP of sales and marketing. Both Longo and Andrew Knott, White Rock's VP of marketing and customer service, say that there have been no merger discussions between the two companies.

The M&A rumors began circulating after White Rock's most recent layoff, which involved 25 percent of its staff (see More Startup Setbacks in Texas). Several top White Rock managers were among those let go, including Tony Masella, White Rock's founder and chief operating officer; Steven Clendening, VP of product planning; and Ron Kelley, VP of sales.

While staff cuts are a fact of life among telecom equipment startups these days, the breadth and depth of White Rock's cuts, to some, suggested it may be thinning its management in hopes of an upcoming merger.

Adding fuel to the rumor were the common board-level threads between the two startups. White Rock and Mahi share a board member in Bandel Carano, a general partner at Oak Investment Partners. Also, White Rock's remaining founders -- CEO Lonnie Martin and VP of engineering Greg Lowe -- used to work for Bill Cadogan when he was chairman and CEO of ADC Telecommunications Inc. (Nasdaq: ADCT). Cadogan is now a general partner with St. Paul Venture Capital and a director at Mahi. St. Paul led a syndicate of 12 private equity firms in Mahi's latest funding round, a $75 million round announced in June (see Mahi Gets a Fresh $75M).

White Rock acknowledges that it did let go several senior staff but says it's not because it's shaping up for a Mahi marriage. "It's very simple," says Knott. "When you have a smaller infrastructure you need fewer senior people."

"I'm not aware of any discussions on the M&A front at all," he says.

Knott did confirm, however, an early report that Pat Rockford has joined White Rock as its new VP of sales.

What remains unknown is what Mahi and White Rock are working on and for whom.

One source suggests that Qwest Communications International Inc. (NYSE: Q), allegedly a Mahi customer, has asked Mahi to offer T3 interfaces in its access switch, which is designed to aggregate Sonet and Gigabit Ethernet within a metropolitan area's largest points of presence. "This is something White Rock can offer using its VLX2010 OC48 Sonet add/drop multiplexer [ADM] with a DS3 tributary," the source says.

By working with specific access vendors, Mahi could guarantee data communications channel (DCC) interoperability in a carrier's network and provide a solution that provisions, manages, and monitors circuits from the access ring through to interoffice facilities, says one industry analyst, who wished to remain anonymous.

Of course, Mahi is careful not to appear too cozy with White Rock, since it must also work closely with legacy ADM suppliers that are already installed in carrier networks. Another industry source says Mahi and Fujitsu Network Communications Inc. (FNC) have an agreement whereby Fujitsu would introduce Mahi to its accounts and use Mahi's access box as a headend to aggregate traffic going to Fujitsu metro ADMs.

The point is that, while Mahi maybe working with White Rock, anchoring itself to another startup would be cutting off its nose to spite its face. "We're using [White Rock] for a very specific, niche application," says Longo.

— Phil Harvey, Senior Editor, Light Reading
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optical_optimist 12/5/2012 | 12:36:53 AM
re: Mahi and White Rock: Just Good Friends Dear "next-gen-wisdom":

9 months from your July, 2002 posting would put us at April 18, 2003. Do you still "know for sure" that White Rock is Chapter 11 toast in no more than 9 months ???? They secured $42 million in funding in December, 2002 and LR's staffers seem to think that Tellabs may pony up some more dough.

I wish I could get paid $10 for every blowhard on these message boards who thinks he/she knows it all when it comes to whether a start-up will sink or swim in the next 6-12 months. I could take a nice spring vacation to the wine country and forget about telecom for a while. A good Pinot Noir sounds great right about now ........

The bottom line is that the VC/OEM/Strategic Investment game is the ultimate chess match. No one knows for sure which companies will get new funds and which ones will be led out to pasture, killed, gutted and so that the semi-valuable (i.e. liquid) remains can be sold to the highest bidder.

The best metaphor for the tactics of the start-up equipment space right now is World War 1 trench warfare. My gut tells me that White Rock will be a WWI survivor. Tellabs is a great partner to have in your bunker.

Over and Out.
The_Holy_Grail 12/4/2012 | 10:06:18 PM
re: Mahi and White Rock: Just Good Friends I read the article twice. An article on LR back in 2001 indicated Mahi was in the optical transport and router market. Another article said Mahi was using tuneable lasers (not very useful in the access space).

When did Mahi change direction to become a access player?

Good luck to all.
LightOfDay 12/4/2012 | 10:06:15 PM
re: Mahi and White Rock: Just Good Friends I don't believe that Mahi is trying to be an access player, but is trying to partner with access products to offer a more complete solution.
If you can help a customer solve all of his needs,
then you have a better chance of selling him your piece of the solution.
inlight 12/4/2012 | 10:06:14 PM
re: Mahi and White Rock: Just Good Friends LR is wrong in saying Mahi is in access area. Mahi is in Core switching business and they do interop testing on potential customer requests with other metro equipment vendors.

This is not unusual.

But exObserver seems to forget other vendors in this space like calix, turin appian etc.

IL
exObserver 12/4/2012 | 10:06:14 PM
re: Mahi and White Rock: Just Good Friends From the outside Mahi and White Rock look like they are two of the better startups left.

I hope they both make it alone or together.
theanswer 12/4/2012 | 10:06:13 PM
re: Mahi and White Rock: Just Good Friends Maybe the 75M was tied to some future announcement! With both companies scaling back for the long haul or a future deal, WRN will need some help as will MAHI.
If WRN can make something back on the options they gave out to the laid off guys, would be a surprise. No one expected to get rich, but a little something for tons of hard work would be nice.
What would really suck is the VCs or Execs to sucker punch the laid off guys with a deal that kills their chance of a small reward for their efforts.
The_Holy_Grail 12/4/2012 | 10:06:12 PM
re: Mahi and White Rock: Just Good Friends I was just going by what the LR article said. But I questioned it since previous LR articles stated otherwise.

"Access equipment maker Mahi Networks Inc. acknowledged Friday that it has been working on a technology solution with White Rock Networks. Both companies, however, deny recent rumors that Mahi is close to acquiring White Rock."
papabear 12/4/2012 | 10:06:06 PM
re: Mahi and White Rock: Just Good Friends Mahi will probably acquire White Rock and Fujitsu will buy Mahi after they get White Rock on board. This would simplify the transaction and probably cost less than acquiring both companies separately.

This will give Fujitsu an access-switching platform (digital crossconnecting, ATM switching, MPLS switching, and IP routing) which they do not have. It will also give them a smaller footprint OC48 & OC192 platform for metro applications. This would be more cost effective than the R & D costs of developing a switching product themselves.
KillerApp 12/4/2012 | 10:06:05 PM
re: Mahi and White Rock: Just Good Friends Nice ring to it.
theanswer 12/4/2012 | 10:06:05 PM
re: Mahi and White Rock: Just Good Friends So what does WRN execs. & VC's get out of the deal? IP (intellectual property) costs? Some engineering staff of which we don't know what would happen? What are the options worth? What does MAHI get? Q2? Q3? Q4? How does either help Fajita (fujitsu) make money in this down economy? Long term employment and screw the options sounds like a turn of opinion. WRN was in the business of being it's own company and not being bought. Times have changed but how much? What I hope happens is the whole damn economy turns around tomorrow and both MAHI and WRN make enough money with good ideas (products) and reward the down in the trenches engineers, past and present who worked so hard.
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