White Rock Expands

RICHARDSON, Texas -- Most workers at optical systems companies here have been busy packing the contents of their desks into boxes. Thanks to layoffs and startup shutdowns, unemployment in Dallas -- which is just south of Richardson's sprawling Telecom Corridor -- jumped to 5.8 percent in November, from 5.4 percent the month before, according to the Texas Workforce Commission (see Down and Out in Texas).

But the box-toting workers at White Rock Networks during the week before Christmas weren't victims of another layoff. And they weren't taking packing up their lives and going home. Instead, they were moving to larger offices, as their employer, for now, vows to keeps its headcount steady and even looks to add a handful of new engineers soon.

White Rock isn't doing massive hiring, by any means, says Lonnie Martin, the company's cofounder and CEO. It has 209 employees now and is looking to add about 14 or 15 more.

But just being able to stabilize headcount is a welcome sign at a systems startup, the type of private company hit hardest in a telecom recession that shows few signs of letting up.

There are now about 1.2 million people in the U.S. who have been unemployed for 27 weeks or longer, according to the U.S. Bureau of Labor Statistics. Worse, that group of long-term jobless people has nearly doubled in size since July, with 280,000 more being added to their ranks in November alone. The number of working Texans fell by 6,800 in November after a 27,800 drop in October, the biggest drop in more than a decade, reports the Associated Press.

But that doom and gloom isn't as noticeable here inside White Rock's new 75,000-square-foot digs. What is noticeable is the smell of fresh paint, the cables dangling from the ceiling of the research and development labs, and the beer tucked away in a corner awaiting the company's weekly Friday afternoon get-together.

White Rock, of course, hasn't been immune to the plummeting fortunes of telecom systems vendors. In the optical heyday of 2000, the company opened a development center in Chicago, partly because it was having a hard time recruiting technical talent with so many other firms doing so much hiring locally. But almost as soon as the doors swung open for business there, White Rock decided to conserve cash and keep all its operations in Richardson.

"We sent five people away that we had just hired," Martin says. "They were somewhat pissed."

The company had another layoff of about 22 people in June 2001. "We were still in the middle of raising our Series C financing, and everyone was getting cautious and our investors were no different," Martin explains. He says that decision to slow the company's development in step with the economy is part of the reason White Rock's transport product doesn't yet support DS1 connections.

Throughout 2001, however, White Rock Networks raised $60 million from its investors, bringing its total funding to date up to about $102 million (see White Rock Feeds on More Funding). Its investors include Mayfield Fund's Todd Brooks, who helped pull the plug on Metera Networks, another Richardson-based metropolitan optical equipment startup, in late September (see Iris Group Wilts; Metera Next to Shutter).

What's the difference?

White Rock's appeal to carriers is quite different from the other multiservice provisioning platform (MSPP) makers. Instead of offering one large integrated system, White Rock offers the various MSPP applications -- Sonet transport, DWDM, packet processing, etc. -- in the form of small, stackable "building blocks" that are all hooked together by 2.5-Gbit/s local equipment interconnect (LEI) cables and managed by software.

In theory, carriers order just the connections they want from White Rock, and its build-to-order model both saves carriers money and provides White Rock quicker development cycles and lower equipment costs. "I don't need to go and tear apart the rest of the system when some new component comes along for my DS3 shelf," says Martin.

Skeptics in the past have said that White Rock offers little more than a small, cheap Sonet transport device with few, if any, fancy services to go along with it (see White Rock: 'Let's Get Small'). But now that carrier spending cuts and layoffs are as common as sunny days here, White Rock's cost-is-everything story appears to be striking a chord with its investors.

It's too soon to tell whether carriers will be on board with White Rock's approach. The company hasn't announced a customer yet, though it says it has finished beta trials with four carriers and will begin booking its first revenues within the first few weeks of 2002.

"Our experience with mainstream carriers is that they're simple guys," Martin says. "They line up two or three reliable equipment providers that basically have the same product. Then they beat the hell out of those guys on price before they buy."

— Phil Harvey, Senior Editor, Light Reading
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