But, a major stumbling block for Ciena was the slow integration of its MetroDirector K2 product, which it gained from acquiring Cyras for $1.1 billion just six months earlier, with its popular CoreDirector product.
“The thing that I thought might save them was the MetroDirector K2 from the Cyras acquisition, and it’s not going to,” said industry analyst Ariane Mahler of Dresdner Kleinwort Wasserstein to Fiber Optics News [1]. “I thought it would be a great complement to the CoreDirector, because the CoreDirector would never be sold to an RBOC, and that is why they acquired Cyras because they knew that the CoreDirector would never pass Telcordia specifications. And they haven’t finished integration of the CoreDirector and the MetroDirector. So there are a lot of reasons why it’s going to take longer for [Ciena] to break into the RBOC market.”
Organizational Change in the Wind
Spokesman Rose tried to put a positive spin on Ciena’s organizational change that he claimed would speed the “Cyras-into-Ciena” integration along. “Jesus Leon, Ciena’s senior vice president of its metro transport division, has assumed leadership of the Ciena metro switching division, and will be in charge of the integration of the CoreDirector and MetroDirector K2,” reported Fiber Optics News [1]. “Leon replaces former Cyras founder and CEO Alnoor Shivji, who has left Ciena to pursue other interests.”
Ajaib was not surprised that Cyras tanked, when I interviewed him during 2013 as I wrote The Upstart Startup. He said, “Alnoor Shivji, together with a few people from Mountain View, said it’s so easy to start a company so let’s start our own. They didn’t have any IP from us, so they did a fresh start.”
And so Cyras was formed. The company had no intellectual property from the Fiberlane split. Siara, not Cyras, had the common IP with Cerent, as Siara and Cerent were sister companies [2] nurtured by Vinod Khosla.
Ajaib added, “Cyras was a spinoff, taking advantage of the market. Everybody was hungry for SONET and so they sold themselves as the SONET experts . . . [using the Cerent and Siara concepts]. They sold slideware. Their product didn’t go anywhere; and it didn’t work.”
Ajaib summed it up in terms of billions of dollars in acquisition prices at the time. “It was basically 8 – 4 – 2. Cerent was eight, Siara was four, and Cyras was two.”
Cyras secured a sum of money from Ciena in line with the radioactive exponential decay analogy, [3] but Cyras did not deliver revenue. Ciena secured just a couple of orders for field demonstrations with Level 3 in America and Beijing IDN in China. Exponential gains were never achieved by Ciena with its Cyras pick up.
Acquiring companies should, without sounding too prescriptive, consider caution and try for those startups with a proven track record and at least some real revenue. A startup possessing a solid product roadmap and a perception roadmap (or vision) would also be useful for any such newcomer to an established market.
Ciena learned its lesson.
[1] Ciena Still on the Spot, Fiber Optics News, September 10, 2001, p.3.
[2] Fiberlane spawned both Cerent Corp. (Petaluma) and Siara Systems (Mountain View and Burnaby, Canada), while those employees not remaining with either of these spinoffs, found a home with Cyras.