lightreading blames Nortel deal for Jasmine burning venture capital. Maybe it is time to blame Nortel for the entire worldwide economic slowdown. (sarcasm intended)
Is the Bloom Off Jasmine?
Jasmine Networks could be wilting as fast as it blossomed. The company has already lost its CEO and laid off about 40
percent of its workers; now it's about to lose a key vice president.
Light Reading confirmed yesterday that Venkata V. Chalam, vice president of engineering, is leaving his post as of April 1st.
Before going to Jasmine, Chalam had been vice president of engineering at Inrange Technologies Corp., and he also held
positions at DSC Communications Corp. and Texas Instruments Inc..
But Chalam isn?t the only one bailing out on Jasmine, say sources. Last Friday the company laid off about 100 of its 250
employees. And Ravi Dattatreya, the company?s chief executive officer, was asked to step down from his position about two
weeks ago.
Officials at Jasmine are keeping tight-lipped about what is happening at the company.
?It?s our policy not to comment on rumors,? says David Frazee, VP of legal affairs for Jasmine. "We?ll be issuing a statement in the next couple of days."
But a source close to the company says that Chalam?s departure, the firing of Dattatreya, and the massive layoff are all the result of an OEM deal the company cut with Nortel Networks Corp. (NYSE/Toronto: NT - message board) back in July
2000.
According to the source, Jasmine put aside its initial plan to build a next-generation Sonet and IP switch to rival those from Cyras (now Ciena Corp. [Nasdaq: CIEN]), Cisco Systems Inc. (Nasdaq: CSCO - message board), and Redback Networks Inc. (Nasdaq: RBAK - message board ), when it was approached by Nortel to build an OC48/ OC192 multiplexer to fit into the optical transport product portfolio that Nortelhad acquired from Qtera.
The $90 million in venture money, which was originally raised for the development of a next-generation Sonet product, was instead used to develop the Nortel multiplexer.
?The product that has been developed is simply a dumb OC48/OC192 multiplexer,? says the source. ?It has nothing to do with the original product plan. There?s no add-drop muxing capability, no production schemes. It takes OC48 in and it comes out at OC192, that?s it."
The multiplexer, which is expected to begin shipping under the Nortel label by the end of next month, was supposed to provide Jasmine with a lucrative revenue stream that could be used to help fund the development of other, more cutting-edge projects. But back in late November, Nortel first reported that it was experiencing a slowdown in its optical business (see Nortel's Fright Night ). With each Nortel warning since then, it became apparent to Jasmine?s investors that Nortel would not be buying as many products as Jasmine had initially hoped for, says the source.
?They spent too much money building this product,? he explains. ?And the board was unhappy that the revenue expectation wouldn?t be fulfilled, so they asked Dattatreya to leave. Someone had to take the blame, I guess.?
Investors are reluctant to finance another round, and the company is being forced to cut back, hence the 40 percent reduction in workforce. As for Chalam?s departure, the source says that he has become disillusioned by Jasmine?s lack of focus and is currently looking for another job.
At first, Jasmine seemed to have the right mix of technical expertise and Wall Street ties (see Jasmine: Wall Street's Way to San Jose ). Before founding the startup, Jasmine?s chairman and director of the board, E.S.P. Das was vice-chairman of investment banking at Merrill Lynch & Co. Inc. (NYSE: MER - message board). CEO Dattatreya had previous stints as senior vice president at Sumitomo Bank Capital Markets, as well as with Prudential Securities and Goldman Sachs & Co. (NYSE: GS - message board ). On the technical side, N. S. Rao, the company?s CTO, worked at Cerent (now Cisco) and Cyras (now Ciena). And Chandra Mouli Ramani, VP of business development, held a top post at Nortel Networks Corp, where he was VP of strategic marketing for optical Internet products for eight years.
The common criticism of Jasmine was that it was a financing play coming late to the market to capitalize on the success of startups such as Cerent, Siara, and Cyras, all of which were sold to larger companies for multiple billions of dollars. Now that the stock market has cooled, the prospects for a quick sale -- or IPO -- have evaporated.
-- Marguerite Reardon, senior editor, Light Reading lightreading.com
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