Telsima Networks, a Sunnyvale, Calif.-based WiMAX hardware maker that had raised close to $70 million in venture capital (and $25 million in debt) was sold to Harris Stratex (s HSTX), a Research Park Triangle, N.C., company for $12 million, which will be paid out over next 12 months. Investors in Telsima include NewPath Ventures, CMEA Ventures, New Enterprise Associates, Intel Capital and JAFCO Asia. Telsima and Harris had a partnership prior to this acquisition.
The precipitous decline of Telsima from the status of WiMAX darling reflects the harsh realities of a startup chasing a market fraught with competition. Telsima was not only battling its own peculiar set of problems, but it also mirrors the mixed results for WiMAX in the race for 4G Wireless Broadband. Four years ago when Telsima launched, WiMAX was seen as a disruptive technology that would sweep the planet: A global standards body, dozens of equipment makers and many more carriers would make a ubiquitous, global, high-speed wireless network a reality, bring broadband to the masses in the furthest corners of the world. The reality turned out to be a bit more sober.
WiMAX is struggling in the U.S., one of the largest and most lucrative telecom markets. Clearwire (s CLWR), its biggest proponent in the U.S. has been hit by the credit crunch. Globally things are better, but marginally. WiMAX has been adopted in increasing number by emerging economies and smaller carriers, which by their very nature don’t have that much money to spend. As a result, dozens of equipment makers are chasing a business with razor-thin margins. Telsima wasn’t any different.
Telsima, in addition to the broader macro-economic environment, had to deal with some of its own internal problems. Following my The State of WiMAX report, I heard from a couple of sources that Telsima was on the block, mostly because its current investors were unwilling to pony up big dollars for the company.
Telsima had hired a U.S. investment banker last year to raise money, but that effort didn’t go anywhere. Over last two days I made quite a few phone calls, but before I could get more details, the company released a press statement regarding its sale earlier today. Telsima had also taken money from Reliance Communications, one of the large Indian telecom groups, and there are some rumors that it wasn’t an easy relationship.
The sad part of the Telsima story is that the company is getting sold at a time when it is beginning to get some traction. Not only does it have one of the best and most complete WiMAX product portfolios, it has also signed up customers such as Neotel of South Africa, Tata Communications of India and is in the running for a $1 billion WiMAX network being built by Indian telecom carrier BSNL. Many Telsima-powered WiMAX networks were being put to work in Easter Europe.
Harris, it seems is getting quite a bargain.