Xtera's $110M Surprise
Xtera Communications Inc. raised eyebrows by announcing a second funding round of $110 million yesterday, bringing the total it's raised to $133 million.
The round came from a slew of backers, led by Rho Ventures and Star Ventures of Munich, Germany (see Xtera Closes $110M Second Round).
"I'm surprised. They seemed quiet lately," says Scott Clavenna, president of PointEast Research LLC and director of research at Light Reading. "I don't hear much about them. It seemed as though they were either getting in trouble or getting their act together."
Xtera says the latter's the case, and that it's been able to attract investors by solidifying its value proposition. That includes a new product slated for delivery in March, a so-called "ultra-wide" amplifier for DWDM (dense wavelength-division multiplexing) systems that Xtera claims will open up 96 extra 10-Gbit/s channels by tapping into a little-used portion of the optical spectrum (1480 to 1510 nanometers). Carriers who buy the amplifier, Xtera says, will be able to literally double the amount of bandwidth they offer without lighting new fiber.
The amplifier will work within the distance limits of most DWDM gear today, Xtera says. In the future, though, it plans to also offer ultralong-haul subsystems that would reach in excess of 1,000 kilometers.
There's another surprise hidden beneath these claims. Xtera's new products are designed to be tacked onto existing DWDM kit from vendors such as Ciena Corp. (Nasdaq: CIEN). That's a different market approach than Xtera was giving out a few months back (see Xtera Communications Inc.). At that point, the vendor seemed ready to compete with a whole gaggle of vendors and startups developing ultralong-haul DWDM systems (see The Ultimate Backbone ).
Now, it looks as though Xtera's found a preferred identity as a partner to the big DWDM players. "We're neither a component nor a system vendor," asserts Paul Harrison, vice president for marketing.
Was this approach the selling point for Xtera's high rollers? It's tough to tell. Some sources think the influx of cash, while large, is only to be expected, given current market conditions. "Frankly, I think it shows life in the market," says Seth Spalding, director at Epoch Partners. "We've seen these kinds of numbers before, but chiefly through public financing in IPOs." He says that as the public market backs off on IPOs, the private sector is starting to increase its level of funding.
"Traditionally, the private sector's taken on greater levels of risk. Some companies that may have transferred to the public market in the recent past are now deciding to raise another private round of funding instead," Spalding says.
-- Mary Jander, senior editor, Light Reading http://www.lightreading.com