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Tropic Taps Investors Again

Light Reading
Supercomm News Analysis
Light Reading
5/25/2005

The ROADM market is almost famous… and more investors are getting their funds in place to ride the Tropical wave to stardom. (See ROADMs: Almost Famous, Tropic Gets Another $48M, and Who Makes What: ROADMs.)

Tropic Networks Inc. announced yesterday that it had closed another $33 million in equity funding and an additional $15 million credit line from several new investors as part of an extension of its Series D financing round. JPMorgan Partners was the lead investor, and the rest of the pack included CrossBridge Partners Fund, Dynamic Venture Opportunities Fund, Narra Venture Capital, VentureLink Fund, and The Bank of Nova Scotia. The operating capital facility was provided by Silicon Valley Bank. Hair and makeup was provided by Casa di Ramon ROADM in Palo Alto.

The first part of Tropic's Series D financing closed last year, with reseller partner Alcatel (NYSE: ALA; Paris: CGEP:PA) leading the charge (see Alcatel Tops Up Tropic and Alcatel Shows Off Tropic Tech).

"As initatives like IPTV start to roll out around the world, that drives some great opportunities for Tropic," says Tropic CEO Kevin Rankin. "The biggest single reason… for the funding was around completing the business case side of the plan to support these partnerships on a global basis."

While IPTV deployments may boost the need for ROADMs, they might siphon capex away from the cause in the short term, according to Heavy Reading analyst Scott Clavenna. In his latest report, ROADMs and the Future of Metro Optical Networks, Clavenna writes: "Many operators continue to focus capex on new revenue opportunities (e.g., IPTV, broadband, VOIP), which can easily divert funds away from metro core optical deployments that are not directly associated with new services."

To date, Tropic only has one announced customer on the cable side, through its partner, Scientific-Atlanta Inc. (NYSE: SFA). (See Tropic Finds a Cable Consort and Time Warner Picks Tropic's ROADM .)

The new funds will help Tropic as it looks to solidify itself against competitors with broader product lines, such as Movaz Networks Inc., and those that are bigger and more entrenched with carriers, such as Fujitsu Network Communications Inc. (FNC). (See Sources: Comcast Has Movaz Stake and Fujitsu Firms Its ROADM Resolve.)

— Phil Harvey, News Editor, Light Reading

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