Telecom Spinoff Draws Investors

Two years after being spun-off from Bellcore (now Telcordia) to focus on the optical data switch market, Tellium Inc. received an infusion of $50 million in a mezzanine round of financing.

This is just one more indicator of the intense equity sponsor interest in practically all areas of telecom (see related story on page 3).

An initial public offering may follow later this year, said William Bunting of Thomas Weisel Partners, in order to fund a period of intense growth in all areas of the company - management, marketing, sales, research and manufacturing.

"To be the kind of player for the customers we anticipate, we need to secure capital," said Michael Losch, Tellium's chief financial officer. "Companies with which we're competing have had successful market valuations - B as in billions, not millions."

Tellium provides an optical data switch that enables telecom networks to expand their bandwidth without investing in heavy build-out. The company recently secured a $250 million, five-year contract to provide optical data switches. The $50 million infusion will be used to fulfill the terms of that contract and enable Tellium to take on other contracts in the near-term.

The private equity deal included $45 million of new preferred shares and the conversion of a $5 million bridge loan. Lead investors included Thomas Weisel Partners and Pequot Capital Inc. They join Cisco Systems, Oak Investment Partners and Worldview Technology Partners, among others. The company currently has no outstanding debt on its balance sheet.