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Telecom Workers Take Control

Some determined telecom rats have refused to be sucked down with the foundering mother ship. Many employees of failed companies have struck out on their own -- either starting their own businesses or buying the assets of their former employers.

It's a phenomenon that's more common than you might think. One example that recently came to light is the former sales team from ADC Telecommunications Inc. (Nasdaq: ADCT), which established itself as Photonic Sales International last month, at the instigation of Paul LaFond, ADC's former VP of worldwide photonic sales.

LaFond says he didn't want to see the talent of his team go to waste. "It took years to build and grow a world-class photonic sales team at ADC," he contends. "I was reluctant to dismantle it even with ADC’s decision to exit the photonics business."

LaFond also spotted a new business opportunity resulting from the current downturn in the market, he says. Small startups, as well as some bigger vendors that have downsized, can't afford to maintain full-time, worldwide sales teams. Enter Photonic Sales, which aims to offer the clout of a larger sales team than a startup could afford by itself.

It's too early to say if Photonic Sales will be successful, but there are plenty of other examples where the gambit appears to be paying off. And in many cases, there is more at stake -- the new management has had to buy the rights to continue providing a service or product.

Take Sifam Fibre Optics Ltd. for instance. Sifam, a U.K. manufacturer of fused-fiber components, was acquired by JDS Uniphase Corp. (Nasdaq: JDSU; Toronto: JDU) in 1999. But it got closed down last summer as JDSU undertook a massive streamlining and restructuring program to stem its financial losses (see JDSU's Rationalization Process).

One hundred and fifty jobs were lost -- but not forever. With financing from U.K. bank HSBC plc, a group of nine Sifam executives put together a £2.5 million (US$4.0 million) package to save the company, which was relaunched under its old name in October 2002. JDSU retained a 19.9 percent stake.

The new Sifam started out with 32 people and now employs 43, according to reports in local papers. "The business ethos was to start small-scale," managing director Paul Ellis told the Herald Express. "It's easier to grow than it is to shrink. The forecast was very prudent, but we've exceeded that and the next quarter is looking comfortable as well."

In another part of the U.K., a similar tale has unfolded at JDS Uniphase's former site in Witney, Oxfordshire. JDS acquired this location in 1996 when it bought GCA Fiberoptics Ltd., a firm that did fiber-pigtailing of active devices for telecommunications.

"The site became the effective headquarters of JDS Uniphase in Europe," says Antoine Michaud, VP of marketing for Afonics Fibreoptics Ltd., as GCS became known after its restart. "But it was shut down in 2001, just three months after completion of the new building."

Nine ex-managers, along with the nearby University of Oxford, scraped together the capital to relaunch the business. No venture capitalists were involved, says Michaud -- despite the fact that the boom time for investing in optical hadn't yet come to a close.

GCS, now Afonics, reopened its doors in December 2001 and is now profitable, according to Michaud. The company has approximately 40 employees, and recently announced a deal through which it packages Vertical Cavity Surface Emitting Lasers (VCSELs) for Honeywell International Inc. (NYSE: HON) (see Afonics Repackages Honeywell Kit).

One factor appears crucial to the execution of a successful management buyout -- speed. "When we restarted as Afonics, production had never actually stopped," says Michaud. That allowed the company to retain many of its existing customers and the staff needed to keep the company operational.

Of course, not all buyouts succeed. A case in point is Coretek, the tunable laser manufacturer that was acquired by Nortel Networks Corp. (NYSE/Toronto: NT) for $1.43 billion. When Nortel sold its photonics business to Bookham Technology plc (Nasdaq: BKHM; London: BHM), Coretek wasn't included in the deal. Rumor has it that Coretek founder Parviz Tayebati did put together a team to try and buy back the business, but he didn't succeed -- possibly because Nortel struck a deal with Bookham to keep it out of the hands of competitors (see Coretek Is Closed).

— Pauline Rigby, Senior Editor, Light Reading
a-dude 12/5/2012 | 12:40:02 AM
re: Telecom Workers Take Control This is an interesting article... I had recently come across an example of this but untill now I was not sure that this is more common than I thought...
Recently (mid last year) a rockville, MD based company called Seneca Networks, a startup making OC48 optical box, was shut down.. I hear a core group of people their have bought equipment and the intellectual property and are trying to make it successful.. The result remains to be seen...
Anyway, an interesting article...
walter_100 12/5/2012 | 12:40:00 AM
re: Telecom Workers Take Control Heartening to know about the tenacity of human spirit in these tough times. I am sure they would have learned from their past mistakes and will streamline activities and operations far more efficiently.
It would be really great if someone makes something out of this.
If someone is doing something like this in the BayArea and would like some part-time help, please mail me at [email protected] I could come down weekends/evenings and chip in.

[email protected] 12/5/2012 | 12:39:14 AM
re: Telecom Workers Take Control I was let go by an early-stage IP television middleware supplier in 4/01. When I told my family, my wife's response was "Road Trip." On the way out of town, she asked that we stop at the library, where she took out all the books on consulting. As I drove aimlessly around the Olympic Peninsula (WA), she read me one. By the time we got home, I decided that was the life for me.

I am now two years into it. Still a lone free-lancer. Technology suppliers in that space have engaged me, as have investors and service providers, and I now write for the industry. I have never worked so hard in my life but i have never had so much fun working, either.

Chin up! As Hunter S Thompson once said... "If the going gets weird, the weird turn pro."

PS - the book was "How to be a Successful Consultant (in your own field)" by Hubert Bermont. Highly highly recommended. No-nonsense. If you are honest with yourself, his approach works/worked for me. You can read this whole book in about 2 hours. You can buy it on Amazon

BobbyMax 12/5/2012 | 12:39:12 AM
re: Telecom Workers Take Control Workers can take over and manage company if no management or technical expertize is needed. So for example a meat plant or an airline industry can be taken over by the employees.
WiserNow 12/5/2012 | 12:39:11 AM
re: Telecom Workers Take Control BobbyMax,

In many companies, Management don't have real management or technical expertise, but the units that they eliminate to save costs have both.

With Management out of the way, the unit's managers can create lucrative opportunities for the unit. Notice manager with a "m" not an "M".

This is a new era. Lucent, Nortel and others are dinosaurs that are dying from their own excessive size. Even downsized, Management has outgrown function. From the head to anything that matters is so far that their systems have broken down. They've eliminated 10's of thousands of people but how many layers have they eliminated?

Consider Napolean's march on Moscow. Supply lines were too long to manage and they lost. Napolean wasn't stupid, but he lost touch.

More than a few layers of Management will cause productivity and effectiveness to drop. Quote me.

The "old school" has a minimum of 6 - 8 layers between anyone who produces and the CEO. There are at least 4 layers between the CEO and anyone who can differentiate between producers and deadwood, between products with a future and deadweight.

In the rarified atmosphere of Top Managment, decisions are made with no input from anyone who actually has "feet on the street". That is why so many Managment decisions are so bizzare.

Don't try to tell me that the boondoggles (expensive golf followed by expensive drinks, dinners and cigars) between clueless CEO's and equally clueless customer CEO's yield real insight.

There is a new revolution brewing in the tech space and it is being lead by the downsized talent with smarts to use the time they have between jobs.
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