White Rock in a hard place

White Rock Networks entered Chapter 11 bankruptcy and suspended operations late last month, dismissing all but about 10 of its 80 U.S. employees while it courts buyers. In nearly seven years, the optical equipment vendor collected about $60 million in revenue from 140 customers. But after having amassed $172 million in five rounds of funding (from investors including Tellabs), White Rock could no longer return to the well. CEO Lonnie Martin spoke with Telephony last week about the company's fate.

On White Rock's downfall: Our rate of sales was not covering all our expenses. To compete against the likes of Fujitsu, Cisco and Nortel, you have to have a minimum cost structure, and if you can't get to and beyond break-even, the only answer is to keep getting funding from your investors. And if your investors — after having put a considerable amount of money in — reach a point of exhaustion, you're between a rock and a hard place.

On M&A: We've been having discussions over the last six months, exploring the possibility of selling the company. We will have talked to five [potential acquirers] this week — companies you'd know the name of. Our aspiration is to sell the company as quickly as the justice system will allow.

On customers: Probably 80% of our revenue is divided equally between CLECs and ILECs. We've also sold to cable and wireless companies, the federal government and campuses. We've left them a bit in the lurch, though we hope it's temporary.

On its biggest sellers: Most customers buy a mix of the VLX 2020 and the VLX 2006. A lot of networks have key hub sites where the 2020 resides and perimeter edge sites where the 2006 resides.

On the Tellabs partnership: The need to append products like ours to [theirs] basically waned. We put VT cross-connect capabilities into the VLX 2020. In that configuration, we overlap [Tellabs'] 5500 products. They'd prefer to sell their own products. [The OEM contract] came up for renewal in late 2005. It was moving from a private label to a reseller relationship, to keep supporting a few customers.

On the 2005 acquisition of Seranoa Networks: I wouldn't say it's a significant contributor yet. We had to take the time to do things that still needed to be done to Seranoa's product. We only fairly recently brought those things to market, and now the product is quite popular. It saves CLECs backhaul bandwidth in getting data back to edge routers.

On overseas assets: Two years ago we decided to open a Shanghai development center, a wholly owned subsidiary. Today it comprises about 75% of our engineering; the rest is in Texas. We still have 70 employees in China.