LVL7 Systems Inc., a developer of software that enables networking equipment vendors to cut down the amount of time it takes to build new products, is about to close on a round of funding totaling as much as $15 million.
LocalTechWire recently reported that LVL7 expected to close the deal by the end of the first quarter. Kishore Jatwani, vice president of marketing says that dotting the I’s and crossing the T’s is all that remains of the negotiations.
LVL7 plans to use the cash infusion to add about 12 sales and marketing workers to its current staff of 60, and for working capital, Jatwani adds.
Privately owned LVL7, founded in 1999 by former IBM executives, has yet to turn a profit, but Jatwani says that the company generated close to $5 million in revenue during fourth quarter 2001. Last August, LVL7 Chief Executive Officer Ernie Baker predicted the company would begin inching into the black by June, but those estimates have since been revised to fourth quarter 2002.
Last year was a jittery time for LVL7. Networking equipment manufacturers, once the darlings of Wall Street and private investors, were devastated during the telecom crash of 2001. Service providers, such as Cary-based Access Point and South Carolina-based New South Communications, were their largest customers, and when investors began turning their backs to the industry the upstart telecoms were forced to abandon plans of building out their own networks. The result was in an inventory glut throughout the market in switches, routers and other hardware.
Now, analysts are concluding that the networking equipment market is stabilizing, and that the sector is likely headed for brighter days.
“We’re anticipating a bit of a pick up,” says Matt Davis, a networking equipment analyst with Boston-based research firm The Yankee Group. “It seems like that inventory is starting to work its way through. I’m not surprised that they are attracting some attention.”
A startup company that focuses on selling its products to telecom companies and is able to attract the interest of private investors during these turbulent economic times is rare these days, but don’t think this signals a return to venture capital firms pouring money back into telecom, says Jeff Barber, general manager of PricewaterhouseCooper’s Raleigh office.
“I do think you will see companies like this come along occasionally that — have some unique technology and are able to build a product out of it,” Barber says. “They’ll attract the attention of venture capitalists. We see a lot of this in our area because of the bigger companies that bring a lot of talent into the area.”
LVL7’s largest customers include companies like Sweden-based SwitchCore, a semiconductor manufacturer, and Quantum Bridge Communications, Inc., a developer of optical networking equipment. Both companies use LVL7’s software, known as FASTPATH, that is compatible with multiple silicon platforms and telecom operating systems.
Other telecom news
In other telecom news:
Charlotte-based US LEC, a telecommunications service provider, announced it added more than 1,000 customers during fourth quarter 2001, and is now serving more than 7,000 businesses in 70 markets throughout the Southeast and mid-Atlantic regions.
US LEC, one of the few CLECs to survive the telecom shakeout, will release its 2001 annual report on Feb. 25 As of Sept. 30, the latest data available, the company’s revenue rose 56 percent to $127.1 million, although its income declined by $118 million.
“Although we are pleased to have reached this milestone, our focus is on reaching the next milestone and on further penetrating our service areas to bring better communications choices to more businesses,” US LEC president and chief operating officer Aaron Cowell said in a prepared statement.
Meanwhile, Atlanta-based Movaz Networks, an optical networking equipment manufacturer, announced that it has signed a multi-million dollar contract with Syringa Networks, an Idaho-based consortium of 12 CLECs, to build an 1,100-mile optical network that will carry both traditional and IP-based telecommunications services. Construction is expected to being this March.
The network will stretch into rural areas throughout the western U.S. that are lacking high quality broadband services.