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Luminous Loses Its Luster

Phil Harvey
12/27/2005
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After more than seven years in business and more than $183 million in funding raised, it's lights out at Luminous Networks Inc.

Light Reading has learned from several Lumnious staff members that the company handed out final paychecks yesterday [Ed. note: Like, happy holidays, you guys!] and is making plans to try and sell its intellectual property.

Employees that spoke with Light Reading on the condition of anonymity are glad something decisive has happened to Luminous, but they're angry at the company's board and management for not taking advantage of chances to sell the company earlier in its history.

"I'm glad there's some closure, but beyond that, there's not much nice to say," says one employee. "We had second-tier VCs and that's what happens when you deal with dumb money."

The company's CEO, Chris Stark, didn't immediately return calls seeking comment. Employees say Stark, a Dallas resident and former Alcatel (NYSE: ALA; Paris: CGEP:PA) executive, commuted back and forth to the company's Cupertino, Calif. headquarters and was not on hand yesterday when the employees got the news.

A complete shutdown seems odd for a company that just talked up being funded a few weeks ago. But what happened, sources say, is that Luminous failed to meet certain revenue goals specified by its debt holder, Hercules Technology Growth Capital , as a condition of getting at a large chunk of the funding it was expecting.

Hercules announced in October that it had provided Luminous with $7.5 million in debt financing during the quarter that ended September 30, 2005. Representatives from Hercules had no comment on Luminous when contacted by Light Reading on Tuesday afternoon. The company is also an investor in Ikanos Communications Inc. (Nasdaq: IKAN) and Occam Networks Inc. (Nasdaq: OCNW)

In its earliest days, Luminous was one of the pioneers in the resilient packet ring (RPR) space as a creator of metro core platforms designed to give Sonet-like features and protection to Ethernet-based rings. (See Luminous Networks.) In recent months, the company had joined several of its competitors in the Ethernet transport space in a race to provide features for VOIP and video applications at the network's edge. (See Luminous Thinks Small.) In between, it received support from the likes of Ciena Corp. (NYSE: CIEN), but that vendor didn't ante-up for the most recent Luminous round, sources say. (See Ciena Links Up With Luminous.)

And Luminous had some customers to speak of. It had somewhere around 50 carrier customers, including Smart Telecom plc in Ireland and China Netcom Corp. Ltd. (NYSE: CN; Hong Kong: 0906) in Shandong (ed.note: snicker). But, one long-time employee says, Luminous partner Scientific-Atlanta Inc. contributed more than 60 percent of its revenues during the past few quarters. (See Scientific-Atlanta Invests $10M in Luminous and Luminous Touts Customers, Products.)

When Scientific-Atlanta sold itself to Cisco Systems Inc. (Nasdaq: CSCO), a Luminous competitor, the company's executives began to furiously look for an exit strategy, employees report. (See Cisco to Acquire Scientific-Atlanta.)

— Phil Harvey, News Editor, Light Reading

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Sisyphus
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Sisyphus,
User Rank: Light Beer
12/5/2012 | 4:10:31 AM
re: Luminous Loses Its Luster
> STOP FUNDING JUNK STARTUPS IN silly con valley

Wow, they got Internet connectivity in padded cells now!
berserk
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berserk,
User Rank: Light Beer
12/5/2012 | 4:10:24 AM
re: Luminous Loses Its Luster
I am surprised it lasted this long, however I wasn't surprised by the lack of compassion/leadership on how the layoff was handled.

Stark and his team have no idea how to market this companies product, and I believe it will just become another dead box along the side of the road.

If Luminous is too have a chance, Stark and his team must be removed ASAP.
canadian
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canadian,
User Rank: Light Beer
12/5/2012 | 4:10:22 AM
re: Luminous Loses Its Luster
With this week's closure of C-COR's SV facility, the Lantern product will come on the market now.

Two RPR technologies are on the market at the same time, guess what happens now?

It's doubtful Luminous will find a good price for it's IP now - there's far more sophisticated IP on the market at the same time.

Lantern's basic product was superior to the Luminous one, although Luminous had more variety.

Here we go again!
Pete Baldwin
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Pete Baldwin,
User Rank: Light Beer
12/5/2012 | 4:10:21 AM
re: Luminous Loses Its Luster
Actually, it doesn't look like Lantern's tech will be coming on the market.

http://lightreading.com/docume...

Although if you know something extra, Canadian, we'd love to hear: [email protected] .
canadian
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canadian,
User Rank: Light Beer
12/5/2012 | 4:10:20 AM
re: Luminous Loses Its Luster
Sorry Craig. No can do.

You'll just have to do your own investigation, won't you?
data_guy
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data_guy,
User Rank: Light Beer
12/5/2012 | 4:10:19 AM
re: Luminous Loses Its Luster
"Actually, it doesn't look like Lantern's tech will be coming on the market.

http://lightreading.com/docume...

Although if you know something extra, Canadian, we'd love to hear: [email protected] ."

If CCOR can swing a buck by selling the IP, they'll do it, now that they have no use for it.
Drop DW a line, he'll appreciate the idea!

DG
godfather
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godfather,
User Rank: Light Beer
12/5/2012 | 4:10:15 AM
re: Luminous Loses Its Luster
Craig,

Drive by the Sunnyvale office - there are no cars in the parking lot today.

Look in Monster - over 100 resumes from C-COR with RPR experience show up. Every one in C-COR working on the Lantern product was sent home.

It's a big mess. Just look at who's running the company now and you'll understand what I mean.

Not sure they're telling the complete truth to the public.
Chicknbut
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Chicknbut,
User Rank: Light Beer
12/5/2012 | 4:10:13 AM
re: Luminous Loses Its Luster
I agree.
Doesn't anyone check the past history of the people they hire? Stark had no vision at Alcatel, did they expect he suddenly got some?

It seems that most of these "CEO"s simply hop from startup to startup never having to produce a product.

Although they always seem to receive a nice severance package.
startup_shutup
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startup_shutup,
User Rank: Light Beer
12/5/2012 | 4:10:08 AM
re: Luminous Loses Its Luster
>> It seems that most of these "CEO"s simply hop from startup to startup never having to produce a product.

A great SCAM in silly con valley....

CEOs just need to keep their VC buddies pleased.

The best response is to shun startups like plague ... in other words it should be extremely difficult for startups to hire people (good as well as bad)
fiberous
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fiberous,
User Rank: Light Beer
12/5/2012 | 4:10:07 AM
re: Luminous Loses Its Luster
The choice to have Chris as the second CEO is
quit interesting and reveals what happens when
ego, greed and power are combined.

The previous CEO was leaving and a new CEO search
was launched.
Quite an impressive set of candiates
walked in and they all decided to leave Luminous
alone. The fact of the matter was that the
previous CEO had told the board to sell and shelf
the compnay and the board was not ready.
He felt that anyone coming after him
to prove him wrong and do a better job than him
would ruin his reputation. He infomred the board
that he would do his best as a parting gesture
to get the right guy on board.

So, he did his best to disuade the good candidates by revealing all the skeletons in
the closet all at once and give them a frightful
picture of the place.
They all walked away.

Finally, the excutive search firm, who were
incentivized to hire the CEO, guessed the game well and dusted off an old resume that they had
put away to avoid a loss to their reputation.
When Chris walked in. The older guy new he had
the fall guy who would be a perfect follow on.

Chris: Desperately out of work for more than a
year, publically acknowledged as a failure at
a large and succesfull optical company then,
generally clueless of managing people and
business, and finally culturally abrasive to the
valley style.

The old guy had found the perfect successor.

The old guy walked away with his very fat cash
bonus for his last accomplishment in glee.
His legacy was secure.
Today, he smiles and tells the story of "I told
you so..." with a smirk.

Finally, the new guy realized that he had taken
a hot seat and one with a ticking noise under it.
He quickly lined his pockets, called out a few
old unemployed buddies and told them of the
open cookie jar. He did Luminous in.

Can you find better selfless leaders than this?
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