Chromatis Networks

» see chromatis.com as it lived, on the wayback machine

~ the obituary ~

In June 2000 Lucent Technologies paid somewhere around four and a half billion dollars in stock for Chromatis Networks, a company three years old with its engineering in Israel and its letterhead in Herndon, Virginia. It was the largest acquisition of an Israeli company anyone had done to that point, and some accounts put the figure at 4.75 billion. Lucent already owned about seven percent of it before the deal. What it was buying was a position in metro optical networking against Nortel and Ciena, in a year when every telephone company on earth appeared to be about to spend the next decade laying glass.

Chromatis had been started in 1997 by Rafi Gidron and Orni Petruschka, who had done this once already: their previous company, Scorpio Communications, sold to U.S. Robotics for seventy-two million dollars in August 1996. The product was called Metropolis, a system for pushing many kinds of traffic onto one wavelength-division fiber ring inside a city, which is the hard middle distance between a long-haul backbone and a building. It was good engineering aimed at a market everyone agreed was about to be enormous.

The market was not about to be enormous. By the summer of 2001 the carriers had stopped buying anything, Lucent was shedding tens of thousands of jobs and preparing a charge somewhere between seven and nine billion dollars, and the metro optical line no longer fit what the company said it was doing. On Monday 27 August 2001 management told the staff that Chromatis was closing. All 150 employees went, 130 of them in Israel, Gidron and Petruschka included. Production of the one product stopped the same week. Contemporary reports described it plainly as a two-year-old start-up that had yet to sell a single product.

~ the case file ~

~ the retirement notice ~

There is a small artifact of the acquisition still in the archive and it is unusually blunt for corporate web copy. By March 2001 chromatis.com had been reduced to one page with the Lucent logo at the top, a browser title reading Chromatis Networks is now part of Lucent Technologies, and a line in bold capitals in the middle of the page: WWW.CHROMATIS.COM IS RETIRED. Underneath, a sentence pointing anyone looking for the gear at lucent.com/ins/products/chromatis/.

That page was written in the confident half of the story, while the product still had a home inside the acquirer. It outlived the thing it was announcing by about a year. The next capture of the domain, in March 2002, is 227 bytes and contains nothing. Today chromatis.com serves a 114-byte stub whose only content is a line of JavaScript bouncing you to a parking lander, the same stub a handful of other dot-com corpses answer with, because one operator holds them all.

~ fifteen months ~

The number that made Chromatis famous twice is the gap. June 2000 to August 2001 is fifteen months between the largest payout in Israeli technology and the morning everyone was sent home. It turns up as a business-school case, usually filed under acquisition diligence, and the lesson people draw from it is normally about Lucent rather than about Chromatis: a company paying for revenue it could not see yet, in a currency it printed itself.

The stock part matters. Lucent paid in Lucent shares, which were worth what they were worth in June 2000 and a small fraction of that by the following summer. The founders had sold a company for a number nobody could spend, and the buyer had taken a write-off on a line item it never shipped. Both halves of the transaction evaporated in the same eighteen months.

~ what the fiber was for ~

Chromatis was built for a buildout that did happen, just not on the schedule its investors needed. The capacity laid down between 1999 and 2001 sat dark for years and then slowly filled, and because it had been overbuilt it was cheap. That is the part of this story that reached me. I got ADSL from TTNet around 2006, at a price nobody could have quoted me in 2000, on an infrastructure whose economics had been set by a glut that bankrupted the people who created it.

Nobody outside the carrier procurement world ever saw a Chromatis box or knew the name. The company existed for four years and shipped almost nothing. What it is remembered for is a single number with nine zeros in it. The gear it was competing to sell eventually went into the ground anyway, built by somebody else, after the crash made it affordable.

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