Mergers & acquisitions

Zaffire: 'We're not for Sale'

A recent game of CEO musical chairs at Zaffire Inc. has triggered Silicon Valley gossip that the DWDM startup is looking to be sold.

The rumors were fueled by the recent announcement that the company had hired Jim Fultz, former executive vice president and chief sales and marketing officer for Antec Corp. (Nasdaq: ANTC), as CEO.

Fultz denies the rumors. “Typically we don’t comment on rumors. But we are definitely not shopping ourselves around."

Fultz says his company has been contacted by potential buyers but describes approaches as "largely unsolicited... I’ve been here five weeks and have already gotten at least five calls from investment banks asking me about taking us public.”

Fultz is CEO number three for Zaffire in just six months. Near Margalit, founder of the company, was the first. Then former Nortel exec, Tony Lavia, was brought in. Four months later, Lavia was ousted and Margalit was back in. As previously reported in Light Reading, Lavia and Margalit disagreed over the company’s vision (see Zaffire Keeps It in the Family ).

“I know there can be some innuendo drawn from our history,” says Margalit, who now goes by the official title of chairman and CTO, “but the decision to bring Jim into the company was mine. I was the guy who interviewed him. It wasn’t driven by the board. We needed an experienced leader to take the company to the next level.”

Margalit says that Fultz was hand-picked for the job based on his leadership at Antec, where Fultz says he grew the sales at the fiber-optic broadband transport technologies vendor from $700 million to $1.1 billion in a little over a year.

While Zaffire previously had set an IPO target for Q1 2001, it has now extended that projection to the first half of next year. But the company emphasizes that the reason for pushing back an IPO has more to do with the current market conditions than with any perceived problems with the company.

Unlike many other metro startups, Zaffire claims that it is shipping to customers: ten to be exact, of which half are already producing revenue. BroadBand Office Inc. (which also happens to be an investor) is the only one Zaffire has announced. But Telseon, an IP data provider, says it is testing the vendor’s equipment and expects to finish trials sometime this spring.

And despite rumors that the company had trouble recruiting top-level engineers a few months back, Zaffire execs say that it has grown its staff right on plan, with the roster now totaling 288, 170 of them engineers. They also contend the company has only about a 2 percent attrition rate.

“I had heard rumors back in the summer,” says Greg Arnold, whose recruitment firm Arnold & Associates has been retained by Zaffire. “There were some concerns about what was happening with the previous CEO [Lavia], but we did some due diligence and their recruitment numbers checked out. Believe me, if we didn’t think they were healthy, we wouldn’t have taken them on as a client.”

But with so many startups vying for the same dollar, it may be hard to keep up the momentum, say some analysts.

“There is a lot of consolidation talk going on,” says Mark Lutkowitz, VP of optical networking for Communications Industry Researchers Inc. (CIR). “Over the next three to 12 months a lot of companies will be combining and partnering. But if they don’t partner or get acquired, there is a higher likelihood that they will fail.”

Margalit agrees that the industry will consolidate. “There are way too many companies in the metro area right now,” he says. “If you look at the whole market there will be a shakeout. But we are in a much less crowded segment.”

-- Marguerite Reardon, senior editor, Light Reading, http://www.lightreading.com

zaffire 12/4/2012 | 7:16:01 PM
re: Zaffire: 'We're not for Sale' This article mentions nothing about Zaffire firing the CFO and her assistant. They also fired the director of HR and she went to ONI ( a major competitor). That same director then started calling and harrassing engineer's. She aired Zaffire's dirty laundry and had to have a restraining order put on her.

The CFO had to sign papers stating that she would not say anything negative about Zaffire. She had to be escorted out of the building the day she was fired. She refused to leave.

The VP of Marketing was "put into a new position". Keep an eye on this. The new CEO most likely has one of his friends in mind for this position...like he did with the new VP of Sales. She is a friend of his from Antac.

Antac? What is that. They left because the company was going down. The new Vp sales has no real management experience.

Zaffire is in huge management turmoil. The company will destroy itself before the stock market even has a chance to rind the bell for its IPO.
zaffire 12/4/2012 | 7:15:54 PM
re: Zaffire: 'We're not for Sale' Despite what Zaffire has held strong to: they are looking for a buyer! The new CEO (what experience does this joker have) just had meetings with small groups of Zaffire employees to anounce that they are "entertaining" offers from other companies...including RedBack and Cisco. He also announced that Zaffire will not go public until 2002. Engineers are jumping ship. Most have been with the company just about 1 year and with the amount of stock that Zaffired dolled out to get them, they are happy with that and are looking to other companies to feed their families.

Zaffire will not go public. They will be sold. They do not have nor did they ever have the managment to turn a profit let alone go public. This company is another one for the DWDM books. They have the technology but they also have too many eager poeple just looking for a quick IPO buck. Near Margalit will rebound from this and start a different company, but he is going to learn the hard way about this one.
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