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Optical/IP

Mahi Restructures & Swims East

Mahi Networks Inc. is restructuring again, to put it mildly.

Light Reading has learned that Mahi is consolidating its company's operations around its East Coast facility -- the South Piscataway, N.J., building it got when it bought Photuris. The company is also preparing to sell off its flagship Mi7 Multi-Service Core Aggregation System (MCAS).

Mahi's VP of marketing, Ron Longo, who was reached by phone Tuesday, says the company is "in active discussions" with "several suppliers" about selling its Mi7 product line, along with its "West Coast switching division."

Mahi’s Mi7 provides STS1 grooming, Sonet crossconnect, switching, and Ethernet transport features in one big system that's designed for the largest carrier central offices. Unfortunately for a privately held, venture-backed vendor, the sales cycles for a device of that magnitude are long and arduous, and the possible customer list is pretty restricted.

Longo says several companies have expressed interest in two carrier opportunities that the Mi7 is involved with. He won't name the carriers, but says one opportunity is a "southeast regional deployment" and that the other is "a Tier-1 design win that will kick off in the next few months."

Light Reading first contacted Mahi as industry rumors had the company closing up shop and going out of business. Recruiters in the area had told Light Reading that resumés were flowing from the company to competitors at an "above normal" clip.

Mahi, it turns out, isn't going out of business, but not much of will be left in Petaluma, Calif., when all is said and done. "The majority of our operations will be consolidated to the East Coast," Longo says.

It's not a surprise that Mahi is morphing. The company has changed its look several times since it was founded in 1999 as it has looked to diversify its products and find a steady revenue stream. In the past 14 months alone, Mahi has: Longo says he can't give more details about how many employees will be laid off, as the restructuring is still in progress. He also declined to comment any further on possible new homes for the company's Mi7 gear.

In years past, Mahi's Mi7 has been linked to BellSouth Corp. (NYSE: BLS), MCI Inc. (Nasdaq: MCIP), and Qwest Communications International Inc. (NYSE: Q), through rumors and industry sources, but the company has only announced deals with Buckeye TeleSystem Inc. and Scana Corp. (See Mahi Secrets Surface, Mahi: Not Just Sushi Anymore, Mahi Nabs $70M, Photuris Assets, and Buckeye Extends Mahi Deployment.)

Mahi's acquired product lines seem to be enjoying more meaningful revenues so far (see Metro DWDM Action Heating Up). In fact, getting into the ROADM market has given Mahi more chances to hit it big with carriers, as several incumbents are asking for a single device that can provide integrated transport and switching at both the wavelength and Sonet layers (see Report: ROADM Market to Nearly Double and Vendors Race for Reconfigurability).

— Phil Harvey, News Editor, Light Reading

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optical_optimist 12/5/2012 | 3:16:35 AM
re: Mahi Restructures & Swims East I think that the lesson learned with Mahi's Mi7 is that it has become a "fools errand" to build a startup telecom equipment company targeting only U.S. major accounts (RBOCs, MCI, AT&T). Mahi has great products, but these products don't fit well in smaller carriers (too big, too expensive).

Other startups (Turin, Calix, AFC when the started) have been relatively successful at first building a base of business with smaller accounts and then gradually targeting select major carriers with longer sales cycles.

I would also say that the RBOCs are worse than they have ever been with regard to their standardization processes. They expect startups to have "big brother" partners, but they
are terrible at brokering such partnerships. They also provide no help to startups with respect to the OSMINE process.

I wish Mahi success with the ROADM product in New Jersey (Photuris), but unfortunately the RBOC quagmire will not go away for them any time soon.

One flew east, one flew west, one flew over the cuckoo's nest. The RBOCs will drive you cuckoo !!!
paolo.franzoi 12/5/2012 | 3:16:32 AM
re: Mahi Restructures & Swims East
I think my comment would be that the startups that achieve success in the IOCs have trouble leveraging that into the RBOCs. Of the named companies only AFC has done it and even then given the issues noted on this website....how much success is still in question.

As to the RBOCs helping startups, for what gain? Some companies (Redback, Pairgain) broke straight in with no issue. My take is that the companies that complain usually don't have enough of a differentiator to make a difference. As for OSMINE, just plan for it and it is not a big deal. It was a big deal for all these startups that planned to sell to CLECs, just to have them disappear.

seven
oxymoronx 12/5/2012 | 3:16:32 AM
re: Mahi Restructures & Swims East whoops ... should have read that a little more ... not metro access ... core service

aren't they the same? :)

kidding.
oxymoronx 12/5/2012 | 3:16:32 AM
re: Mahi Restructures & Swims East This has acquisition preparation written all over it. Anyone know if the latest funding round had a tier one equipment provider associated with it (ie. cisco, ciena, nortel, etc.)

pure speculation, but dumping overhead and product lines like metro access seems to indicate consolidation prompted by buyout inquiries from a company that doesn't want a california office or a metro access product. Also, a big indicator is the rush of resumes.

I could be completely wrong.
rjmcmahon 12/5/2012 | 3:16:30 AM
re: Mahi Restructures & Swims East Targeting smaller carriers first is a nice strategy, but a lot of hard work. I like the companies who are willing to go that route and admire their ability to get funding. It's a tough job to find investors who have the patience to allow you to do it that way.

I think there may be a fundamental conflict between investors and any carrier that derives their revenues from usage based billing, a la the PSTN. This financial model seems completely broken to me, regardless of small or large carrier.

A step towards the solution may be finding ways to promote customer ownership of the outside plants.
douggreen 12/5/2012 | 3:16:30 AM
re: Mahi Restructures & Swims East The forumula for any startup selling to a large carrier (IOC or RBOC) is to have something that they need desperately and can't get from anyone else. Neither big IOCs nor RBOCs are motivated to buy from small companies unless there is some kind of gun to their head. THey will almost always choose an inferior product that does the job to gain stability in the supplier.

Finding a need that you can solve exclusively is extremely difficult, but not impossible (e.g. Cienas original 16 and 40 channel DWDM). The problem is that too many startups target these companies without having the goods.

Targeting smaller carriers first is a nice strategy, but a lot of hard work. I like the companies who are willing to go that route and admire their ability to get funding. It's a tough job to find investors who have the patience to allow you to do it that way.
horse of a different color 12/5/2012 | 3:16:21 AM
re: Mahi Restructures & Swims East OSMINE no big deal for a start-up? Minimum resources + limited funds = BIG problem for start-ups. I was in a start-up that had a LOT of funds (but ultimtimately failed due to a less-than-successful business model) and couldn't make it happen. A start-up trying to enter the RBOC or ILEC space without deep pockets is a recipe for disaster/failure. The telecom road is littered with the bodies of those who have tried.

These days the best way to approach these big guys as a new player on their field is to change the rules (ala Cisco). They have the deep pockets, the technical prowess, the resources and the time to make/force it to happen.

The only way a start-up can succeed these days is to plan for an aquisition and forget the IPO road. It's a sad reality, but reality nonetheless.

horse

voyce_overipee 12/5/2012 | 3:16:17 AM
re: Mahi Restructures & Swims East sorry forgot to un-italicize
The forumula for any startup selling to a large carrier (IOC or RBOC) is to have something that they need desperately and can't get from anyone else. Neither big IOCs nor RBOCs are motivated to buy from small companies unless there is some kind of gun to their head. THey will almost always choose an inferior product that does the job to gain stability in the supplier.

So true! But it's more than "stability" from supplier, it's the relationships, purchasing process, and the not-going-to-be-fired-for-buying-from-a-big-dog syndrome. Same thing is happening in the VoIP space. the only successful startups are the ones not competing with the cisco/lucent/nortel/siemens of the world. any smaller guy who thinks they'll succeed with a softswitch or gateway is in for a rude awakening. i think even Sonus is in trouble, or will be soon.
we'll see how long the app server, policy server, and SBC guys can succeed before the big dogs start making their own inferior but good enough products.
voyce_overipee 12/5/2012 | 3:16:17 AM
re: Mahi Restructures & Swims East The forumula for any startup selling to a large carrier (IOC or RBOC) is to have something that they need desperately and can't get from anyone else. Neither big IOCs nor RBOCs are motivated to buy from small companies unless there is some kind of gun to their head. THey will almost always choose an inferior product that does the job to gain stability in the supplier.

So true! But it's more than "stability" from supplier, it's the relationships, purchasing process, and the not-going-to-be-fired-for-buying-from-a-big-dog syndrome. Same thing is happening in the VoIP space. the only successful startups are the ones not competing with the cisco/lucent/nortel/siemens of the world. any smaller guy who thinks they'll succeed with a softswitch or gateway is in for a rude awakening. i think even Sonus is in trouble, or will be soon.
we'll see how long the app server, policy server, and SBC guys can succeed before the big dogs start making their own inferior but good enough products.
bsd_devil 12/5/2012 | 3:16:02 AM
re: Mahi Restructures & Swims East I have always believed that mahi was run by idiots! Instead of taking the ops all the way out to India or some other cheap country and saving some good amount of money, these guys are taking it east to NJ!! I can't f***ing believe it!

are they also moving their engineers or are they laying them off in petaluma? cause if they are laying off, petaluma is going to be empty very soon!!!
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