Zaffire Scores $20M Contract
The company will announce on Monday that FiberStreet Inc., which offers broadband IP access to enterprise customers, has agreed to deploy Zaffire’s Z3000 DWDM products in its network in early 2001. The deal is expected to generate about $20 million for Zaffire over the next two years.
“That’s a big contract for them,” says Scott Clavenna, president of PointEast Research LLC and director of research for Light Reading. “Zaffire is promoting very low cost metro DWDM, so a contract this large represents a significant quantity of systems.”
This is the second contract that Zaffire has made public. The first was with BroadBand Office Inc. back in October for an undisclosed amount (see Zaffire Keeps It in the Family ). But the company says it has made more than 14 shipments to 12 service providers. It’s rumored to be in talks with Global Crossing Ltd. (Nasdaq: GBLX); and Telseon, another new service provider, has acknowledeged that it’s testing the gear. This announcement comes at a critical time for Zaffire. Yesterday’s news that the company has laid off 20 percent of its sales force, coupled with recent executive shifts, has spurred debate and doubt over Zaffire’s future (see Zaffire Fires 20% of Sales Team and Zaffire: 'We're not for Sale').
So, is Zaffire’s flame burning brightly -- or is it flaring out? The jury's still deliberating, to judge from the discussion generated on Light Reading following yesterday’s story (see Article Talk). Some on the message board concur that yesterday’s layoffs were necessary and a smart move for the company, while others question the company’s viability and products.
There is also more generalized trouble on the horizon for the metro DWDM market, because many potential CLEC (competitive local exchange carrier) customers are struggling to get funding for network buildouts, says Clavenna.
“I’m not sure that any of the metro DWDM players are finding enough demand for the kind of capacity Zaffire's products generate,” he says. "I do think, however, that regional metro DWDM networks will get the most traction, and that's where Zaffire is playing."
Clavenna also notes that the market for metro DWDM is rather small, and public companies like ONI Systems Inc. (Nasdaq: ONIS) and Nortel Networks Corp. (NYSE/Toronto: NT) are getting most of the action so far. “Zaffire has a challenging road ahead of them."
But Zaffire’s CEO Jim Fultz remains optimistic and reiterates that the company is still working toward an eventual initial public offering.
“Some startups are doing fine, and some seem to be suffering,” says Fultz. “We’re one of the ones that are growing. The timing of the layoffs is unfortunate, because it gives the impression that we are foundering, but that isn’t true at all.”
-- Marguerite Reardon, senior editor, Light Reading, http://www.lightreading.com