Our interview this morning is with Jim Nevelle, CEO of Sorrento Networks (www.sorrentonet.com). Jim gave us the background on the newly created firm, which has taken the optical assets of Zhone Technologies -- originally acquired from the original Sorrento Networks -- and created a new company focused on the optical networking space.
Tell us the story about your company, and how it came about?
Jim Nevelle: Sorrento Networks was acquired by Zhone Technologies in the middle of 2004. Then, last year, Zhone decided to strategically position the firm to focus on its core assets. They decided to focus on the broadband, triple play and access to the home initiative, and to allow other aspects of the company to spin out. Tim Anderson and myself took the former Sorrento and optical products, and peeled it out to focus on the optics space.
What's your experience and background, and why did you get involved in spinning out Sorrento from Zhone?
Jim Nevelle: Tim Anderson was the CFO of Carrier Access, and I was CFO and COO for Veralink Corporation. We were both in the Denver and Boulder area, where Tim and I met up. Verso was acquired by Veralink. There, we saw the opportunities to provide telecom equipment to carriers both in the states and internationally. After I left Verso, Tim and I teamed up and created Sorrento, and pulled out the product line from Zhone.
What are you looking to do with the new company?
Jim Nevelle: We're focused on the metro optics side of the business. We're going to grow it from where it was--it didn't get lots of TLC under Zhone. We're trying to capitalize on the strong growth in the telecom sector. Things like Gigabit Ethernet have high demand, anywhere from connecting data centers to different applications like IPTV. We want to take advantage of the market demand with the product line we have.
Where do your products fit into the market, and how do people use them?
Jim Nevelle: What we are doing is fairly focused. We have our GigaMux product family, which deals with WDM technology--that's wavelength division multiplexing. We do DWDM - Dense Wavelength Division Multiplexing, and CWDM - Coarse Wavelength Division Multiplexing. What we provide is essentially point-to-point, ring, or tree topology fiber networks with no nodes--where the equipment hooks up to the fiber cable. That can range from slow speeds such as T1, to Gigabit Ethernet with multiple interfaces.
Is this used for Metro area networks, or telecom networks?
Jim Nevelle: There are three facets. One is for cable carriers with big pipes. Cable companies use those for providing video on demand services. They use our equipment to connect head ends to regional areas. Telcos are using it to provide Ethernet services to their customers--that's anywhere from connecting data centers, to providing infrastructure to hospitals, to connecting school districts and libraries. Then, you have enterprise customers, who use it to hook up their different locations. We have customers like major banks, who use it for their financial backbone.
How has the spinoff been funded and who is backing the new company?
Jim Nevelle: The financial backers are a local firm, CHB Capital Partners in Denver, which is a private equity group. They provided funding for the acquisition, for funding activity going forward, and for other acquisitions down the road if need be.
Can you talk a bit about the telecom equipment market -- it looks like this market is back?
Jim Nevelle: Back in early 2001 timeframe, quite a few optics and telecom companies were going out of business--there was a long list of names. Sorrento was one of the survivors. What has happened in the marketplace today, is that people were caught completely off guard in late 2007. Bandwidth demands have just gotten out of control, due to new bandwidth requirements. Gigabit Ethernet to connect data centers is popping up. Things like YouTube, downloading videos and songs from the Internet, and video-on-demand services are driving bandwidth requirements through the roof. With that, people need to be able to reach the backbone infrastructure to get to customer sites. That's what metro networks are all about. It's the sweet spot where Sorrento is. We're seeing large demand, and healthy demand, and have seen lots of proposals from customers and deployments going on.
How big are the company's operations in Denver?
Jim Nevelle: Denver is our administrative headquarters--all of our engineering and operations are actually in the Bay Area. We also have a support organization in Europe, in Germany. Those folks all came over from Zhone.