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Networker garners $52 million in funding

Start-up Ellacoya Networks will announce Monday that it has raised $52 million in second-round funding as it gets closer to wide release of its broadband services equipment.

    Start-up Ellacoya Networks will announce Monday that it has raised $52 million in second-round funding as it gets closer to wide release of its broadband services equipment, the company said.

    Ellacoya snagged $34 million in initial funding this past May.

    The latest round, bringing Ellacoya's total to more than $86 million, will help its development, marketing and sales efforts. The company has an initial version of its Service Generation system available and is scheduled to start testing a telecommunications carrier-class version of the equipment by the second quarter of next year, according to company executives.

    Ellacoya makes a set of equipment for high-speed Internet service providers that allows those companies to better manage customers on their systems and create new services for those customers quickly, the company said.

    Ellacoya's funding comes amid a downturn in the fortunes of most networking companies, with stocks plummeting because of concerns over future telecommunications carrier spending and the overall malaise on the tech-heavy Nasdaq.

    "The market has changed and it is more difficult," said Mike Rubino, chief financial officer for Ellacoya.

    But analysts remain optimistic about the chances of young networking companies, noting that only network operator spending is supposed to grow less than some expected, leaving billions of dollars for those that succeed.

    "I would suggest there is no better industry to be a start-up in," said Paul Johnson, analyst with investment bank Robertson Stephens.

    Johnson said Ellacoya's proposition to the market is more comprehensive than that of potential rival Redback Networks, for example, allowing the company to craft a niche for itself.

    Ellacoya's second round of funding was led by Goldman Sachs, with additional stakes from existing company investors Lightspeed Venture Partners, Bessemer Venture Partners, Centennial Ventures and Lighthouse Capital Partners.