Tenor downsizes, retrenches
 
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Multiservice switch start-up Tenor Networks this week laid off 49 people, or 41% of its staff, in an effort to conserve cash during the current telecom slump, sources close to the company say.
Tenor is also refocusing its product development away from the MPLS core, saying the window of opportunity for the technology never opened. Tenor says it will repackage its hardware and software into products that continue to emphasize the capital expenditure benefits of packet infrastructures, but with a heavy bend towards Ethernet.
"I don't see any MPLS core switch market," says Tenor President and CEO Dave Tolwinski. "It never developed as an independent market. That's all stalled. The biggest risk now is to understand when the market's going to recover, how it will restructure, how it will re-emerge. I don't think the worst is over yet. We might be on the bottom but we're going to be scraping along for a while."
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The company confirmed it reduced its workforce this week but would not say how many, nor whom. The reductions were across the board, affecting sales, marketing and engineering, and included Executive Vice President of Worldwide Sales Araldo Menegon, sources say.
Tenor now employs 71 people.
The action was taken to conserve cash until 2004 and possibly into 2005, timeframes for when Tenor expects spending among its service provider customers to pick up again, Tolwinski says.
"It's enough to carry us into '05 without relying on additional sales," he says. Tolwinski also says Tenor does not plan another round of additional funding.
Tolwinski would not say how much cash Tenor has or what its burn rate is. But the company's Web site says it has raised more than $120 million to date since November 1998, $93 million of it coming from its third round almost two years ago.
Tenor has not yet taken revenue on its TN250G core switch even though the product has been generally available for a year. It continues to be involved in a number of carrier trials, Tolwinski says.
Tenor will continue to enhance that product, but it appears future product development will focus on platforms closer to the edge, designed for Ethernet provisioning and aggregation.
"Ethernet has some of the disruptive business cases relative to some of the lower-speed technologies," Tolwinski says. "The only data service that carriers are making any money with is frame relay. Ethernet coming into that space with its capital cost model and bandwidth model is disruptive to that."
Tenor has a "huge software asset" that it can leverage going forward, Tolwinski says.
"We may have to lay back and repackage the product," he says. "We may have to add new features, subtract some features as things develop. But that's what we're going to do. In effect, we're resetting the clock back to where we feel more like a start-up now, but we have the advantage of a very strong capital position, a software base and a product, direct account access looking at our product... That's a lot of material to make a success at independently of how dire the market is. The only thing that's going to sink us is if this thing doesn't recover by 2005."
Tenor also confirmed that it sold some packet processing intellectual property to semiconductor maker Mindspeed. Sources say the transaction also involved the transfer of some Tenor ASIC engineers to Mindspeed but Tolwinski would not confirm that.
He did say that the outsourcing deal with Mindspeed saves Tenor at least $2 million.
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