Recruitment Packages Balloon

It's crunch time in optical networking and companies are doing whatever they can to attract the best and brightest to their team. The list of incentives goes on and on: signing bonuses, interest free loans, college tuition for children, and of course stock options. Some companies are even guaranteeing the starting price of their stock when it goes public to attract new recruits.

"The tech sector has taken on a professional sports model," says Robert Muldoon Jr., managing partner with Sherin and Lodgen, LLP http://www.sherin.com, a law firm in Boston that handles technology related cases. "Now everybody wants a signing bonus."

When asked about recruiting talent for their company, most start-ups claim that they don't have a problem. "People don't ask for bonuses or anything extra," says one exec at Terawave Communications http://www.terawave.com. "It's amazing, you know," says another from Cyras Systems, Inc. http://www.cyras.com. "People just come to us."

But the truth of the matter is that promising technology and impressive management teams only go so far. With nearly 20,000 jobs going unfilled in the networking industry this year, according to The Network Mining Company http://www.networkmine.com, a recruiting firm, vendors are stepping up to the negotiating table armed with lots of cash, options, and other incentives.

One prime example is Corvis Corp. http://www.corvis.com, which plans to go public in the near future (see Corvis Sets Price Range for IPO). In order to lure Glenn Falcoa , an executive VP at Corvis, away from his job as president of Nortel Networks' Internet service provider business http://www.nortel.com (NYSE:NT) , the company came up with aggressive incentives.

Corvis offered Falcoa a $200,000 interest free loan to buy or renovate his home, a $120,000 signing bonus, and a $60,000 relocation package on top of his $165,000 annual salary, according to the S1 filed with the SEC. In addition, Corvis agreed to pay up to $400,000 to help Falcoa close out stocks options agreements with Nortel. And of course the most valuable part of the package was the 3.6 million shares in stock options in Corvis.

ONI Systems Inc. http://www.oni.com (Nasdaq: ONIS), which just went public this month, has also paid out hefty amounts to entice its senior staff to join the company. Chris A. Davis, executive VP and CFO of ONI, joined the company this past May and received a $300,000 bonus and one million shares in stock options, to go along with her $400,000 a year salary, according the company's S1 filing with the SEC.

While Falcoa's and Davis's packages are both on the high end of the spectrum, even lower level engineers and sales and marketing staff have seen compensation packages double and triple in the last two years, according to Glenn Rostie, general manager and president of The Network Mining Company. Middle management VP's are getting $50,000 bonuses, salaries close to $100,000 and anywhere from 30,000 to 200,000 shares in stock options, say some experts.

It seems like an awful lot of money to spend on recruiting, but Rostie says it's worth it. "If you are taking someone from a competitor you're not only adding a resource to the company but you're hurting the competition," he says. "And a lot of VCs and boards backing these start-ups are willing to open up the coffers to do that."

Rostie says other incentives have included college tuition for children and guarantees that IPO stock prices will attain certain levels in the market.

The explosive demand for qualified employees, especially in optical networking, has rewarded recruiters, too. Rostie claims his fees have increased as much as 50 percent in the past two years, receiving $20,000 to $35,000 for placing an average mid- level management candidate. He says 40 associates are each pulling in hundreds of thousands in revenue.

"It's a whole new vocabulary," says attorney Muldoon. "I was in family court the other day and instead of talking about alimony, the lawyers were discussing the allocation of stock options. It's just different now."

by Marguerite Reardon, senior editor, Light Reading http://www.lightreading.com

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