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Gadzoox Networks

Egad! It's axed one third of its staff, and its stock trades for pennies. Can it survive?

"The Fibre Channel switch war was won outright by Brocade a long time ago," says Steve Duplessie, an analyst with Enterprise Storage Group Inc. "Now [Gadzoox] might have a better, cheaper, faster product, but the problem is that Brocade owns the OEM, and most of the decisions are made in the OEM."

Dan Tanner, an analyst with Aberdeen Group, paints a similarly dreary picture for Gadzoox: "With Brocade enjoying about 90 percent of the market and in light of the growing importance of IP technology and the poor economy, it’s not surprising that smaller companies are facing tough times."

The stifling competition has definitely taken its toll. In September, Gadzoox reported that it had ended its last quarter with $14.5 million in cash, and that it expected to burn about $7 million of that over the current quarter. Since the company hasn’t announced any new customers or OEM wins over the last quarter, Byte and Switch estimates that it only has about one more quarter left before it runs out of cash.

However, Cynthia Jordan, who until August 2000 was director of administrative operations at Gadzoox and now holds the same title at optical networking components provider Gigabit Optics Corp., claims that the company will be announcing additional funding of $9 million sometime over the next few days. She says she still maintains contact with Gadzoox insiders, who provided her with information about the new funding. (Gadzoox officials declined to comment on the supposedly imminent funding.)

Jordan -- who still owns a number of Gadzoox shares -- also says she expects the company to announce several large customer wins in the near future.

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