Cereva: Stalled, Not Stopped

Times are tough for Cereva Networks Inc. Despite big plans and big backers, the vendor's hit some snags on the way to unveiling its high-end SAN switch.

Cereva made news earlier this year by emerging from stealth mode long enough to acknowledge a $130 million round of funding from a series of high-profile VCs (see Cereva and Cereva Details Storage Switch). The company reluctantly said it was working on a massively parallel switch for use in storage area networks (SANs).

Now, despite general industry enthusiasm for its product pitch, the startup's reportedly having a tough time raising cash fast enough to meet its growth needs. This has apparently led to a range of problems, both real and rumored, including layoffs, a change of CEOs, confusion over beta tests, and various financial woes.

Here's what's confirmed: Last week, Cereva said goodbye to its first CEO, Alan G. Lutz, an ex-Newbridge exec. This week, a new CEO stepped into the office -- Mahesh N. Ganmukhi, a member of Cereva's board and the founder and ex-CEO of Ignitus, the ill-fated passive optical networking (PON) company purchased by Lucent Technologies Inc. (NYSE: LU) last year (see Lucent, Chromatis & Ignitus: A True Tale? and Tales of Lucent: Readers Respond).

Cereva's not explaining the CEO switch. "Mr. Lutz left for personal reasons," is all spokesman Bruce MacDonald will offer on the subject.Could Cereva's problems obtaining further funding have led to some internal turmoil?

No, the company says. "We're not having problems getting funding, it's just taking longer," MacDonald says. "Tough economic conditions mean terms sheets are stricter, negotiations take longer, VCs want more leverage."

A lack of immediate cash, he admits, forced Cereva's management to layoff 65 people, roughly 25 percent of its staff, on May 24.

Cereva's also rumored to be late delivering product to its beta sites. Not so, says MacDonald. But he admits that the initial list of beta sites obtained by Light Reading earlier this year was inaccurate.

Indeed, when we phoned one of the sites previously mentioned by the company, GiantLoop Network Inc., for confirmation of a beta trial, we were told the provider had no plans for one."We have never been a beta tester, nor involved in any capacity with Cereva's equipment," said Jon Oltsik, GiantLoop's VP of corporate marketing. GiantLoop's talked to Cereva, he says, because it makes sense to talk to any vendor that combines optical networking and storage capabilities, but it hasn't gone beyond that.

MacDonald says the mention of GiantLoop in former interviews was "out of line." Now, instead of four trials, Cereva says it's publicly announced just one, with NaviSite (Nasdaq: NAVI), a provider of managed hosting services. Cereva's on track with that beta and plans a second at an undisclosed customer site in Massachusetts, MacDonald says.

Cereva's product delivery is still slated for general shipment during the third quarter of this year. And despite an urgent need for cash, MacDonald seems confident the company is on plan for its next round. "We are on track," he says.

- Mary Jander, Senior Editor, Light Reading
http://www.lightreading.com