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Tahoe Confirms Cutbacks

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LR Mobile News Analysis
Light Reading
7/2/2002

Wireless service node startup Tahoe Networks has confirmed rumors that it has laid off staff but insists that customers will implement its Mobile Internet Edge (MIE) infrastructure platform before the end of the year.

The layoffs are part of a general restructuring last week that also saw a transfer of power between the cofounders, with company president Dr. Arthur Lin taking over the role of CEO, replacing the firm's "visionary" Anthony Alles, who will work with the board on company strategy.

Alan Cohen, VP of marketing for Tahoe insists that the layoffs will not affect the company. "They're in the low double-digit percentage range," he says. "The core engineering and customer facing functions haven't changed at all."

Tahoe is locked in a battle with Megisto Systems, Starent Networks, and Watercove Networks Inc. to create next-generation service nodes (PDSNs/GGSNs) that will allow carriers to develop and offer a variety of wireless data services (see Having a Flutter on the GGSNs).

Tahoe has tended to concentrate on CDMA2000 networks and the Asian market especially, opening a Japanese subsidiary and forging a distribution agreement with Oki Electric Industry Co. Ltd.. "We're about to announce a couple of others," Cohen says.

However, Tahoe says it has not neglected the European market entirely. Cohen says that the company is working on a GSM/GPRS-based version of its product.

It remains to be seen which of these startups -- if any -- will actually end up as the supplier of choice to the carriers. Phil Marshall, program manager of mobile and wireless technologies at Yankee Group told Unstrung in June that the next 12 to 18 months will be crucial for the companies to move beyond customer trials, often with unnamed partners, and actually get their products into carrier networks. "The most important thing for them is to establish incumbency," he said.

In today's environment, operators are leery of working with startups, and many are seemingly unconvinced of the value of these new nodes.

Tahoe has raised around $50 million in funding. Cohen would not comment on how much money Tahoe has left or what its burn rate is. However, he said that the company expects to have another "financial event" soon.

— Dan Jones, Senior Editor, Unstrung
http://www.unstrung.com

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Guglielmo
Guglielmo
12/4/2012 | 10:10:16 PM
re: Tahoe Confirms Cutbacks
In calculating Tahoe's burn rate and remaining cash, what about the persistent rumors that they had to pay substantial compensation to Redback, for intellectual property misappropriated by an ex-Redback engineer? (They tout the Redback connection here: http://www.tahoenetworks.com/n... )

As an aside, this article presupposes the battle is among startups like Megisto/Tahoe/Watercove. The bigger question is whether any of these companies can find an angle compelling enough to displace incumbents like Ericsson, Nokia, Lucent and Nortel from the radio world, and Cisco, Junisphere and 3Com from the data networking world. Such competitors are particularly daunting considering how slowly the mobile data market is developing. Slow favors incuments over startups.
wiredgenius
wiredgenius
12/4/2012 | 10:10:13 PM
re: Tahoe Confirms Cutbacks
Boy do you have a lot of time of your hand. You are either one of the people at MEgisto sitting on your burn rate or an underworked staffer (not line manager) at an incumbent. Get a life. We know who you are
noitall
noitall
12/4/2012 | 10:10:12 PM
re: Tahoe Confirms Cutbacks
Gugs, good memory. What actually happened is that the matter was settled out of court for a smallish sum in the grand scheme of things. Less than 1% of total financing in the first round. So not a significant impact to Tahoe. The engineer in question is a punk who should be shot at point blank range. Tahoe management had nothing to do with IP theft. In fact the guy went back to RBAK for a short time. RBAK sued everyone in the valley, or threatened to, because they were getting picked over so aggressively and losing some good people. It was a defensive move for RBAK and totally baseless. But rather than fight a costly battle in court, they settled.

To your other point: let's be clear: not one of the "big three" startups in this space is displacing NOK, ERICY, COMS, CSCO, etc. There won't be one fork lift upgrade with these new systems. There simply aren't existing products out there that wireless operators will actually replace. And not one of the large systems companies have anything significant for edge type applications that watercove, megisto and tahoe say they'll deliver. What is likely to happen is that these startups will sign the larger vendors to channel agreements and support contracts.
Even more likely:

ERICY buys Megisto because the management is from there. Watercove goes away because they were there first, but didn't know what they were doing and were too early to market, the carriers' needs changed and now they're running out of money much faster than Tahoe or Megisto which were a little later to the "party" that hasn;t yet started. NOK and CSCO make a run at Tahoe and/or Megisto and the bids get competitive.

BTW both Megisto and Tahoe have very committed investors. Neither one of them will let these companies die without a good fight.
Guglielmo
Guglielmo
12/4/2012 | 10:10:05 PM
re: Tahoe Confirms Cutbacks
notthebluetoothfairy wrote:
"What actually happened is that the matter was settled out of court for a smallish sum in the grand scheme of things. Less than 1% of total financing in the first round."

Sounds like $300K to $350K? Bet that made for an interesting Tahoe board meeting!

Surprised that Redback would take back an engineer who had absconded with their intellectual property.
noitall
noitall
12/4/2012 | 10:10:04 PM
re: Tahoe Confirms Cutbacks
closer to $500K. it was in the papers.

my theory is that rbak actually planted the guy to see what tahoe was up to, then took him back. now, i'm not totally sure of this so there's a disclaimer but the circumstances were very bizarre. rbak at the time was trying re-tool the 10k for wireless operators and most of the engineers bolted and went to tahoe so rbak was p.o.'d and went after tahoe in court. from what i'm hearing rbak is now focused again on its core business and trying to get the optical line off the ground. the nok deal was noteworthy so i could be wrong: they could be very focused on the wireless operators.

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