Zhone Rezones

Zhone Technologies Inc. is closing down two of its U.S. offices in a move to cut costs and to bring product groups closer together, Light Reading has learned.

The two offices affected are Zhone’s Richardson, Texas, and Minneapolis facilities. Zhone established itself in Texas when it bought softswitch maker Xybridge in December 2000 and in Minnesota when it bought Roundview Inc., an IP and networking software group (see Zhone Adds Xybridge to Its Cart).

Zhone, which makes a wide variety of local access equipment for service providers, first denied that there were any layoffs occurring in the two offices, stressing that the reason behind Zhone’s moves was to get certain product groups closer together. Zhone spokesman Tim Donovan told Light Reading on Thursday that Zhone does not “acquire companies and then get rid of their people. That just doesn't make sense.”

People with knowledge of Zhone’s reorganization confirm that Zhone’s goal in closing its Minneapolis office was to bring its IP engineers to its corporate headquarters in Oakland, Calif., the town about which Gertrude Stein famously remarked: "There's no there there."

“They were told: ‘You still have a job, but it’s in Oakland,’” says one source.

In all, about 25 people are affected in Minneapolis, and it’s likely that only a few will decide to make the trek to the Bay Area. “I think very few here will take them up on the offer,” says one source. “People just don’t like to leave Minnesota.” (Go figure.)

The narrative involving the Richardson office is a bit different. Light Reading sources in Texas and in Oakland say that half the workers in Richardson were given an opportunity to relocate to Boston, and the rest – about 40 people – were let go.

Those sources add that the one reason Zhone would combine its softswitch unit with its network management unit in Boston is because both teams do extensive work using the Java programming language and it makes sense to keep all of that expertise in the same building.

The group in Richardson was given until May 15 to close the office, and they’ll be considered “on leave of absence” until June 15, after which their severance package goes into affect, Light Reading sources say.

When contacted by Light Reading on Friday, Zhone hedged a bit from its earlier comments about staff reduction. “We would like to think that headcount would remain untouched as we consolidate these offices,” says Donovan. “But is that realistic? Probably not.

“With any sort of consolidation there may be some redundancy of positions, but that tends to be minimal," he adds. “In the Xybridge marketing group there are probably some redundant positions, and we're probably talking about three or four people there. Don't get me wrong: There probably will be a few people that will go, but nothing of magnitude and nothing that would put us in defense-mode."

Xybridge was established in February 1999 when Telesoft Inc., a telecom systems integrator founded by Jawad Ayaz, formed the company as its product subsidiary. Zhone purchased Xybridge in December 2000 for an undisclosed sum. Ayaz, who could not be reached for comment, is said to be starting another company in India now.

Zhone filed for a $345 million initial public offering in October 2000 and, despite the recent economic downturn, the company is still in registration (see Zhone Files for IPO).

Since September 1999, Zhone has grown at an incredible pace (see Zhone Details Product Strategy). In the past two years it has made at least five acquisitions, including: CAG Technologies, an electronics subsystems maker; Premisys Communications, whose Integrated Multiple Access Communications Server (IMACS) provides most of Zhone's revenues; and OptaPhone Systems Inc., maker of point-to-point wireless systems.

Zhone had only eight employees in September 1999 and swelled to about 490 one year later. Donovan says the firm now has about 615 employees.

– Phil Harvey, Senior Editor, Light Reading http://www.lightreading.com
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fatchance 12/4/2012 | 8:30:16 PM
re: Zhone Rezones Oakland has some great 'hoods and a neat airport. You can take BART and get into San Francisco with ease. They even named a highway exit for Zhone. The town is slowly looking etter for business.
skeptic 12/4/2012 | 8:30:15 PM
re: Zhone Rezones Zhone was trying to blow itself up to a bigger size to sell itself. When the IPO and M&A
markets went south, it backfired on them and they are destroying all the pieces that they don't consider "essential". So Zhone is writing off the companies and dumping the people involved.
If you look closely at the original deals, they
will be keeping something other than people. I mean how much sense does consolidation to two of the most expensive cities to live and do business in make?

If the markets had not turned, Zhone is just the sort of worthless company that would have attracted the attention of companies like nortel and alcatel. They might have been on their way to being the next ascend.

mydogbleu 12/4/2012 | 8:30:07 PM
re: Zhone Rezones I think everyone's starting to smell what Mory stepped in. He was hoping to see another Ascend story with this company. His buddy McGinn is no longer at LU and there's no company that will buy this dream. Mory, being the shrewd businessman he is, should liquidate. Come back in a better market with a better business plan. The old ones don't cut it anymore.
galilye 12/4/2012 | 8:29:53 PM
re: Zhone Rezones zhone's buy out of us was completed towards the end of feb. at which time I would say 20% of xybridge was let go. this included marketing, hr, and sales so i have no idea why zhone is even mentioning marketing being cut back at this time in this article...we were guaranteed by our former ceo that zhone would not come in and buy us out and lay us all off...but that is exactly what has happened. on april 26th we were all notified that 50% would be let go and 50% would be given the opportunity to relocate to Boston. afterwards it was rumored that the 50% that were given the opportunity to relocate were the ones that zhone was going to have to pay a larger amount of severance to...so, in turn if those people turned down the relocation they would only receive the nominal severance...yet if they take the relocation...it is rumored that zhone will lay them off anyway with in the next couple of months...there was no forewarning of this and even upper management did not know about this until the night before the announcement.
dirty splice 12/4/2012 | 8:29:53 PM
re: Zhone Rezones You are clearly confused.

noitall 12/4/2012 | 8:29:52 PM
re: Zhone Rezones skeptics should realize this is the same company, in a different building, with a different logo and some really interesting battle experiences, that ate cisco's lunch in the access and core switching markets: ascend. people tend to forget that the company, before it sold for an unbelievable sum, beat cisco in some very important market segments, for many years and basically invented the access market we know today...don't count zhone out until their last dollar is spent.
hippo 12/4/2012 | 8:29:51 PM
re: Zhone Rezones Another reason why you don't wanna trust these guys:

Our old friend, Richie McGinn, personally invested in Zhone WHILE HE WAS STILL IN LUCENT!

chubbabubba 12/4/2012 | 8:29:51 PM
re: Zhone Rezones Don't forget that Mory & Co., wearing Ascend clothes, bought another IP company in Minnesota that couldn't deliver and had to be axed (if not formally, but informally strung along due to politics). This time they just let'em go.

Sing along! Oops I did it again ...
skeptic 12/4/2012 | 8:29:51 PM
re: Zhone Rezones skeptics should realize this is the same company, in a different building, with a different logo and some really interesting battle experiences, that ate cisco's lunch in the access and core switching markets: ascend.

They are also the same company who blew themselves up like a balloon with M&A + phony projects that looked good on slides, but were never going to happen.

Ascend was never worth what Lucent (stupidly) paid for it. And if Lucent had not purchased them, they would have been out of business.

They had one good access product, but that product was already mature by the time lucent bought Ascend and all sorts of new players were in the market ready to eat ascend's lunch (which they did, and lucent ended up having the problem).

I would not count them out, but if I were working for them, I would not trust them in any way. And I would look a long time before buying anything these people were involved in.

noitall 12/4/2012 | 8:29:50 PM
re: Zhone Rezones agree with the posts here: these people are hard to trust and they're not nice people. also, they put together a house of cards that lucent stupidly bought for $24 B. still, they are very smart people and how many people do you know could have pulled off the smoke and mirrors show that resulted in a $24 B check???

i give zhone about a 50/50 chance, about in line with the other well financed companies in the business that are just starting to book business.

will be interesting to see if they could go from hitting a home run to striking out, this fast, and this loudly. only time will tell.
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