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Optical/IP

Hammerhead Swings $18M More

Still alive and kicking, switch startup Hammerhead Systems Inc. has closed another round of funding for $18 million.

The round, announced this morning, was led by Foundation Capital and included all of Hammerhead's current investors: Apex Investment Partners , Enterprise Partners Venture Capital , Mayfield , Pequot Capital Management Inc. , and Silver Creek Ventures .

Remarkably, the multiservice aggregation vendor says all five of its funding rounds have been "up" rounds. That is, Hammerhead's valuation has increased each time, to -- well, officials aren't saying, but it's more than $98 million, which is what Hammerhead has raised so far.

"Each round, we've had a significant increase in valuation, including this round," says Peter Savage, Hammerhead's CEO.

Savage says he's wanted to keep Hammerhead on a pace of roughly one funding round per year. Hammerhead had last picked up $30 million in early 2006. (See Hammerhead Nails Another $30M.)

The company hasn't done any large-scale deployments yet, nor has it named any customers. What's kept Hammerhead afloat, in addition to a couple of rumored big contracts, is the confidence of its investors.

Hammerhead is a post-bubble play, founded in 2002 without illusions of a quick exit. Kevin Fong, a partner with Mayfield, describes Hammerhead as a long-term bet that the industry would need new blood after the downturn played out. It's taken longer than expected for carriers to start spending again, but the turnaround is finally happening.

"One of the reasons why we did this round is that we sort of see the light at the end of the tunnel for their customers," Fong says. "It's a business for guys that want to win marathons. This is not a sprint." [Ed. note: It's not an Embarq, either.]

While staying the course, though, Hammerhead has gone through at least one period of upheaval. Two senior members of its technical team left in 2004 as Hammerhead shifted its emphasis to focus more on MPLS, VPNs, and pseudowires. (See Hammerhead Founder Steps Aside and Hammerhead Retools MPLS Approach.)

The company also changed CEOs, bringing in Savage, a former Hatteras Networks Inc. chief, to replace former Lucent executive Joe Sigrist late in 2004. (See Headcount: A Pox on Petaluma?)

But Hammerhead does seem to have picked up some business for its product, the HSX 6000 Layer 2.5 Aggregation Switch. Hammerhead said last year it had two customers signed and was using that momentum to target the large European carriers. (See Hammerhead Pushes Plans.) Names were never announced, but one of the customers was reported to be what's now called Verizon Enterprise Solutions . (See Has Hammerhead Nailed Verizon?)

In any event, Hammerhead says it's now on the verge of volume shipments.

"We've got the start of some deployments in the second half of this year, but the real, budgeted deployments come next year," Savage says.

And that means the money has begun trickling in, although Hammerhead won't give specifics. "We have revenues in the range of a company that is in trials," Savage says.

— Craig Matsumoto, West Coast Editor, Light Reading

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gocowboys 12/5/2012 | 3:04:41 PM
re: Hammerhead Swings $18M More Ok...if you walk into a VC's office with a telecom equipment play the door will likely hit you on the way out. Yet, there is "happy money" for companies like this. Am I the only one that does not get it?
opticalguy 12/5/2012 | 3:04:39 PM
re: Hammerhead Swings $18M More Ninja,

You say..."They basically third party brands a Fujitsu product slap there name on it and call it Hammerhead."

Are you saying that this is really a Fujitsu box? If it does MPLS, does this compete with the router vendors (Cisco, Juniper) and sit in the core??

Curious.

OG
Lite Rock 12/5/2012 | 3:04:39 PM
re: Hammerhead Swings $18M More ninja,

That said, you've removed all doubt for me.

LR
ninjaturtle 12/5/2012 | 3:04:39 PM
re: Hammerhead Swings $18M More This company is a big LOOSER!!!!!!!!!. They basically third party brands a Fujitsu product slap there name on it and call it Hammerhead. Not exactly the kind of model one would think would ever make money. There management is shaky at best and they are run by nobody's in the High Tech networking industry. They are bold face liars that every round is an up round. IMPOSSIBLE. But when you are provate you can say anything and get away with it.
gigeguy 12/5/2012 | 3:04:38 PM
re: Hammerhead Swings $18M More I think Ninja has things a bit backward ... HH did their own product development (I know a bunch of the people there) and for a while they were being resold by Fujitsu. However, I believe that particular resale agreement has since concluded.
Ryan Lawler 12/5/2012 | 3:04:37 PM
re: Hammerhead Swings $18M More "They basically third party brands a Fujitsu product slap there name on it and call it Hammerhead."

ninjaturtle's got this backwards:

Fujitsu's Flashwave 6400 box is a repackaged version of the Hammerhead Systems Inc. HSX 6000, part of a reseller deal struck in 2004.

http://www.lightreading.com/do...
Ryan Lawler 12/5/2012 | 3:04:37 PM
re: Hammerhead Swings $18M More "They basically third party brands a Fujitsu product slap there name on it and call it Hammerhead."

ninjaturtle's got this backwards:

Fujitsu's Flashwave 6400 box is a repackaged version of the Hammerhead Systems Inc. HSX 6000, part of a reseller deal struck in 2004.

http://www.lightreading.com/do...
Pete Baldwin 12/5/2012 | 3:04:35 PM
re: Hammerhead Swings $18M More They do claim to have two big paying customers ... but it sure doesn't look like it from the outside. I've been dogging them about that for a couple of years.

I do have trouble believing every round was an "up" round, but I also doubt that Kevin Fong would get on the phone and tell me so if it wasn't true. (Sure, he could be fibbing, but it would be easier for him to just not return my calls in the first place.) We'll see.
ninjaturtle 12/5/2012 | 3:04:35 PM
re: Hammerhead Swings $18M More I probably do have it 180 wrong. Either way I still stand by the rest of my opinion. If they go IPO I'll eat my hat. Funny how no one has bought this gem!!!!!!!!!! Oh yeah I forgot they are still looking for a paying customer...MY BAD
paolo.franzoi 12/5/2012 | 3:04:34 PM
re: Hammerhead Swings $18M More
BobbyMax has risen.

seven
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