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Spinnaker Sheds Staffers

Does layoff signal a change of direction? UPDATED 12/11/01 1:30 PM EST

Spinnaker Networks Inc. has laid off eleven staffers as it seeks new funding. But the company denies rumors that the action resulted from pressure by its backers.

The Pittsburgh startup, founded in December 1999, is in the midst of securing its second funding round. It received $20.4 million in its first round from Menlo Ventures and Norwest Venture Partners -- which are expected to participate in the second round as well. Other VCs also appear to be involved in this round, but the company isn't revealing their identities.

According to a source who requested anonymity, Spinnaker was "forced" by its backers to lay off a certain percentage of staff. The outcome, according to the source, was that the entire team developing Spinnakers application-specific integrated circuit (ASIC) chips was axed.

“The VCs have mandated a layoff plus a complete [change] in the product direction -- scrapping the hardware and telling them to develop a software-only solution,” says the source, who adds, “Morale is very low.”

Fred Gohh, VP of ASIC engineering at Spinnaker and one of its founders, did not return phone calls and did not respond to email requesting comment.

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