Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Technical analysis for shorts & longs -- Ignore unavailable to you. Want to Upgrade?

To: Johnny Canuck who wrote (35232)	11/22/2001 5:35:42 PM
From: Johnny Canuck	Read Replies (1) \| Respond to of 68674

Acorn falls as network industry sags By Craig Matsumoto EE Times (11/01/01, 6:19 p.m. EST) [Semiconductors News] <http://img.cmpnet.com/eet/cdi/spacer.gif> <http://img.cmpnet.com/eet/cdi/blackarrow.gif> Chip makers' road map brings EDA into the loop <http://img.cmpnet.com/eet/cdi/blackarrow.gif> Motorola's exit fails to cool RFID fervor <http://img.cmpnet.com/eet/cdi/blackarrow.gif> Pentagon seeks common control for unmanned aircraft <http://img.cmpnet.com/eet/cdi/blackarrow.gif> Servers gas up with 4-Gbyte/s PCI-X 2.0 spec <http://img.cmpnet.com/eet/cdi/blackarrow.gif> Self-generating processors advance <http://img.cmpnet.com/eet/cdi/spacer.gif> SAN MATEO, Calif. ? The slumping networking industry has claimed another victim. Network processor startup Acorn Networks (Reston, Va.) has laid off nearly all of its employees and is closing its doors. The company is undergoing a legal dissolution and its next step will probably be a Chapter 7 bankruptcy filing, chief executive Eric Broockman said Thursday (Nov. 1). Acorn Networks had secured two separate merger deals that could have saved the company, but both fell through as the acquirers got gun-shy about the slumping economy, Broockman said. Rather than continue to burn cash, Acorn's board of directors chose to shut the company down in hopes of saving some money for its creditors. The closure is the second in a month of a company in the network processor sector. Entridia Corp. recently laid off most of its staff and began searching for an acquisition deal. More network processor companies are likely to drop out of the market as funding continues to be scarce, particularly for niche players, said Bob Wheeler, senior analyst with The Linley Group, a research consultancy in Mountain View, Calif. "The players that are kind of on the fringe of network processing are going to have trouble getting funding," Wheeler said. Several companies that might have shared Acorn's fate are being buoyed by financing secured earlier this year, he added. Acorn had begun sampling its GenFlow line of traffic management co-processors and was on track to reach profitability by June 2002, Broockman said. But the difficult economy was too much to fight. "The problem we had was a concern from our customers about our long-term viability, which becomes a self-fulfilling prophecy," Broockman said. In addition, Vitesse Semiconductor Corp. had announced it was producing a chip similar to GenFlow. As the economy worsened, customers chose to wait for Vitesse's chip rather than take a chance on Acorn, Broockman said. "On paper, their product looked pretty good," but Acorn "didn't seem to have much design-win traction," Wheeler said. Acorn had negotiated a deal to be acquired and was preparing to review the merger documents, which were due to arrive Sept. 13. But following the Sept. 11 terrorist attacks, the acquiring company backed out, citing the sagging economy, Broockman said. The company told him it could no longer justify a "non-accretive" acquisition and that it was too difficult to predict when Acorn would generate revenues. Acorn secured a letter of intent to be acquired by a second suitor, but that company also backed off due to the economy. "With those two deals falling through, the probability of getting venture capital was not very high," Broockman said. Considering Acorn had a bridge loan outstanding, it wasn't prudent to continue burning cash and risk leaving Acorn's creditors with nothing, he said. "We decided to shut down soon enough to still leave money for all the creditors," he said. Acorn is trying to sell its intellectual property, and a few employees have been retained to continue that process, Broockman said. [Harry: I am not sure where this leaves LNOP. They do not have a huge cash reserve. They should just be starting to source their chip in December. They have a LU design win and IBM is producing their chips and has an equity stake. MRVL should be alright as they are no longer just a processor company, they have other product lines since the MRVL/MMCN merger.]