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Networking start-up files to go public

Optical networking start-up Tellium files to go public, the latest in a long line of high-end equipment companies to test Wall Street's appetite.

Optical networking start-up Tellium filed a registration statement with regulators to go public today, the latest in a long line of high-end equipment companies to test Wall Street's appetite for communications technology stocks.

Tellium makes a set of fiber-optic switches that can send Internet traffic at high speeds over long distances. Competitors to Tellium include Ciena, Sycamore Networks and Cisco Systems, among others.

Tellium did not disclose in its filing with the Securities and Exchange Commission the amount of shares to be offered to the public or a price per share for the offering. The company hopes to continue the streak of hot network equipment IPOs, highlighted by the runaway success of offerings from Corvis and Avici Systems.

The Oceanport, N.J.-based company, founded in 1997, is one among several high-end networking start-ups attempting to spur interest from telecommunications customers for their optical networking equipment. The company has signed three potentially lucrative deals with telecommunications companies thus far in advance of its filing today for an initial public offering.

The company last week announced a $350 million equipment pact with Cable & Wireless and already has a $250 contract with network operator Extant.

The company this week announced a third deal, with Qwest Communications International. Under terms of the deal, Qwest has committed to purchasing a minimum of $300 million of Tellium's equipment over the next three years, according to the SEC filing.

As part of the deal, Tellium also issued two warrants to a subsidiary of Qwest for it to purchase 2 million shares of Tellium common stock at an exercise price of $30 per share. Tellium also sold 333,333 shares of common stock at $30 per share to officers and affiliates of Qwest, according to the filing.

The opening of pre-IPO shares to customers by Tellium continues a practice among equipment start-ups and their telecommunications network customers.

Tellium reported sales of $7.6 million and a net loss of nearly $20 million for the first six months of this year, the filing said. Tellium said in the filing that it has "derived virtually all of (its) revenue from sales to Extant."

The company also said in the filing that it has an accumulated deficit of $65 million.

Tellium's agreement with Cable & Wireless includes a provision that allows the network operator to reduce its "minimum purchase commitment from $350 million to $200 million" if Tellium does not continue to provide a "technological edge" for Cable & Wireless.

Tellium also issued 1.5 million shares of stock to AT&T in connection with an intellectual property license from Ma Bell.

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