Xtera Scores Surprise $30M

In a startling turn of fate for a long-haul startup, Xtera Communications Inc. says it's closing $30 million in a third round of funding.

This is the first funding Xtera's had since it scored $110 million in its second round in January 2001 (see Xtera's $110M Surprise). This new infusion brings Xtera's total funding to $163 million. The round will stay open for the next three months; it's presently led by previous investors Sevin Rosen Funds and ComVentures, but others from the company's previous rounds are expected to join soon, according to Xtera spokesman Wes Roberts.

What's surprising is that so much money is going to an 80-person startup whose competition is dropping like flies. Ceyba folded this month (see Ceyba Shuts Down and PhotonEx Corp. may be next (see Ex-PhotonEx? ). Another startup, Ottawa's Innovance Networks, is apparently still in business and even rumored to have been in the running for a big government contract (see Lehman Spots Gov't RFP Surprises), but execs there haven't answered repeated calls for comment over the past few weeks.

So why has Xtera scored when others are biting the dust? The company has no announced customers, though Roberts says there is considerable traction with carriers in North America. Several Xtera VCs -- including Jon Bayless, a general partner at Sevin Rosen and also Xtera's CEO and chairman -- did not respond to calls and emails requesting information.

But an odd wrinkle in the story might offer a clue. One source says Xtera may have purchased (or be in the process of purchasing) the assets of another optical firm, possibly those of Metro-Optix, a circuit-to-packet metro central office switching vendor that went out of business last month (see Metro-Optix Pulls the Plug).

Xtera's Roberts says the company has no plans to change its product strategy at this time. Still, augmenting its existing wares with additional technology -- particularly from a metro company that had some traction, as Metro-Optix claimed it did -- could make a difference in the product's marketability. And Xtera's used assets before to modify its product line (see Xtera Gets Raman Patents and Xtera's New Plan).

Kris Shankar, a former exec at Metro-Optix, won't comment on the rumor, and other ex-employees did not return calls. Xtera's Roberts says only that the company is continually evaluating opportunities such as asset purchases, but does not comment on them. He knows of no agreement to buy assets from Metro-Optix at this time.

Analysts find the possibility intriguing, though. One industry source, who asked not to be named, says Metro-Optix was showing BLSR (Bidirectional Line-Switched Ring) protection software, adapted from the Sonet world, as one of the intellectual property assets it was interested in selling. Since software is usually a lot cheaper than hardware or ASICs, it's possible the stuff could be picked up by a company like Xtera for a relatively small fee.

Even if there's nothing to the rumor, the idea that Xtera's up to something is intriguing. Another source, Sam Greenholtz of Telecom Pragmatics Inc., says there's a move to marry long-haul transmission with crossconnect functionality, akin to what Metro-Optix may be selling. "It may not be such a bad idea," he says.

— Mary Jander, Senior Editor, Light Reading

Lite Rock 12/4/2012 | 11:34:24 PM
re: Xtera Scores Surprise $30M Great job getting more blood from the same turnip. I am sure some are giving a sigh of relief up in Allen. To bad the new money likely means more layoffs, unless sales can actually bring in some business.

Sam Greenholtz of Telecom Pragmatics Inc., says there's a move to marry long-haul transmission with crossconnect functionality, akin to what Metro-Optix may be selling. "It may not be such a bad idea," he says.

What a wonderful concept... It's a great opportunity for marketing, They can call the new product the Integrated Multirate Transport Node.


Never underestimate the entertainment value in any situation.
echo2 12/4/2012 | 11:33:57 PM
re: Xtera Scores Surprise $30M My options are going to make me rich!

lightsplitter 12/4/2012 | 11:33:48 PM
re: Xtera Scores Surprise $30M Anyone know what kind of sense this makes? MetroOptix might be a good buy (heck, if you have a good arm, you could throw a rock and hit MetroOptix from Xtera ;) ), but I don't see the market for longhaul (or any of the many marketing-spin variants....SAN/WAN, etc...) improving anytime soon. There are just too many big players that can offer the same packages, with full blown support to boot.

Just curious what anyone else thinks. There are still many startups in this area hanging by their fingernails.....any news on Innovance or Celion?

whyiswhy 12/4/2012 | 11:33:37 PM
re: Xtera Scores Surprise $30M Those guys at Xtera are more slippery than a Texas tadpole in a mudhole!

All things terrestrial long haul are hoping for a GIGBE scrap.

Word on the investor street is Innovance lost out on GIGBE, and the discussions around the board table are what to do with the cash: stand and burn or return?

Could this be the case for Xtera too? Big pile of (easily revocable) cash to chum for a gov contract?

Titanic Optics 12/4/2012 | 11:33:36 PM
re: Xtera Scores Surprise $30M A movie about two more undead got $36M over the weekend. Xtera got $30M.

Why do the undead get so much money when the living are starved for cash?

How come we can't kill these things?
BerkeleyWolf 12/4/2012 | 11:33:32 PM
re: Xtera Scores Surprise $30M Good article...
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