Maranti Guillotines 15

Instead of throwing a party, storage switch startup Maranti Networks is celebrating the belated approach of its first product launch by laying off 15 of its approximately 75 employees, Byte and Switch has learned.

The San Jose, Calif.-based company cut the jobs last Friday. Especially hard hit was the engineering department, which lost 13, according to company spokesman Rich Mullikin. Maranti also let go two people in marketing, he says.

Byte and Switch received an anonymous tip that four of the lost jobs belonged to company directors, but the company refused to reveal whether this is in fact the case.

So, why the layoffs? It was a "strategic" decision, Mullikin says.

As we prepared for the product launch, it just became clear that some engineering and marketing positions were less critical,” he says, adding that Maranti has been able to stave off layoffs much longer than many of its competitors. “This was a fiscally strategic move to reduce costs as [we] ramp up to product launch.”Maranti had initially expected to launch its monster 400-plus port switch last October, but has constantly pushed back the deadline (see Maranti Makes a Monster). Now, however, Maranti insists that it is getting really close. Mullikin says the company should launch the switch within the next 60 days, and that it will definitely start shipping by the end of this year.

And last week’s layoff isn’t going to slow the company down, says Harish Nayak, Maranti founder and VP of marketing. “There is absolutely no change in product traction,” he says, insisting that the company already has a number of beta customers testing the new switch. “We are moving forward as aggressively as we were before the layoff.”

The question, of course, is whether the company has enough cash hidden in its mattress to last it that long. Maranti was founded in October 2000 with $6 million in funding from Alliance Ventures. Then, in December 2001, the company received an additional $25 million round from Menlo Ventures and Trinity Ventures (see Maranti Scores $25 Million).

Last summer, Maranti’s director of product marketing Rick Walsworth said the funding should last "well beyond its launch and into its first quarters of revenue." (See Maranti's Momentum Flags.)

But that was back when Maranti thought its switch would reach GA by October 2002. While many of the company’s intelligent switch startup competitors have been busy raking in piles of new funding over recent months, rumor has it that Maranti only has about two months of funding left (see Can $35M Save Sanera?, Can Troika Triumph on Take Two?, and Acopia Gets $30M Cornucopia). Slashing jobs could be a last desperate attempt to keep its head above water.Nayak insists that’s not the case. “Startups are always looking for money,” he concedes. “But that’s not our first concern... We certainly have cash to get past product launch.”

Even if Maranti does finally manage to get its behemoth SAN switch out the door, finding customers for it may prove difficult. There are plenty of other huge, intelligent SAN switches already cluttering the market.

And while Maranti probably will have a fair shot competing against other small startups, like Candera Inc., many developers of similar technology have already been swallowed up by industry heavyweights that help lend them credibility (see Candera Unveils Controller). There is of course Cisco Systems Inc.'s (Nasdaq: CSCO) Andiamo Systems Inc. switch, Brocade Communications Systems Inc.'s (Nasdaq: BRCD) Rhapsody switch, and -- most recently -- McData Corp.'s (Nasdaq: MCDTA) acquisition of Sanera Systems Inc. (see Cisco SAN Sales: Ramping Hard?, Brocade Reupholsters Rhapsody, and McData Sweeps Up Nishan, Sanera).

“You have to always keep your eyes open about the competition,” Nayak says. “But we believe that we have the best product that delivers the most value to the customer.”

Nayak refuses to reveal much of anything about Maranti’s new switch before it hits the market, but claims that, unlike most store-and-forward architectures, the startup’s switch is based on an inline, cut-through architecture. “We’ll offer better, faster, and more cost-effective products,” he says.— Eugénie Larson, Senior Editor, Byte and Switch