The Future of PingTel

Matthew did a great job of calling Nortel a PIG. So much love for Mike Z's folly. I wonder how much longer this sick game can go on with Nortel, Mike Z has engineered a 70% drop in stock price while giving him self a big pay increas. What a guy.

“No such thing as a coincidence” – Graham Greene, The Human Factor.

So, let’s follow the money, shall we?

What a coincidence; both Bluesocket and PingTel share an early stage investor by the name of Vesbridge (an off shoot of St.Paul Ventures); in fact a VC partner named Zenas Hutcheson was the ‘sponsoring partner’ at PingTel (read: Mr. Command, Control and Communications). For info, PingTel was a very early player in the OST space (Open Source Telecommunications), a credit to their founder’s vision (love those founders).

Years later a gent named Mads Lillelund (a very good man, I assure you) joins Bluesocket as its CEO and, within a short interval of his tenure he is forced (read: FORCED!) to acquire a dying company by the name of PingTel. Mads, being the new kid on the block, has no recourse but to accept this ‘mercy killing’ and tries to ‘market it’ as a ‘strategic fit’. I think they called it VoWiLAN (Voice over Wireless LAN), of VoWiFi (Voice over WiFi) or something like that. In any event, the deal is sealed. Remember that Zenas is the partner at the ‘common VC’ of both PingTel and Bluesocket.

PingTel’s CEO was a gent by the name of William Rich, formerly an Entrepreneur in Residence at St’Paul’s Venture. Important to note that St.Paul Venture split in two firms, one of which is Vesbridge, where Zenas is a Managing Director (yes, check your scorecard). So Vesbridge, unwilling to write off PingTel as a loss shoves it down Mads’ throat, receives preferred shares for playing the funding ‘Capo di tuti capi’ role and ends up on the board of Bluesocket (still lists Zenas of St.Paul’ Ventures as its Board member).

When I fist met Mads, he was trying to sell me some pretty cool video gear during his tenure at Lucent Digital Video, a venture that was way ahead of its time (at the time, I was a co-investor and CEO-pro temp at Niagara Broadband, a venture located on the Universal Lot in Burbank that also boasted a Mr. Spielberg -as in Steven – as its other co-investor). Both organizations were too early and Mads became a VP of Worldwide sale at a company called Enterasys. Wow, talking about coincidences. It is the same organization that had John Roese (not a true gent, I assure you), as its CTO. Yup, that John Roese.

So, I figured John Roese, having blown his MiMo WiMax soapbox to smithereens needs a new soapbox and what better than the OST movement. After all, John is a geek (and most definitely not a Telco/Wireless guy), an open source geek at that.

Somewhere in there he talked his boss or his strategy pal George Riedel to OEM PingTel’s box but PingTel was going south (read: Bluesocket could not make a go of its forced acquisition). So, there it is, Nortel buys PingTel’s ‘assets for an undisclosed sum’ (read: no money, just promises) and saves John Roese’s ass, again.

Net-net: Vesbridge dumps a ‘dog with fleas’ and gets shares in a promising late stage start-up (Bluesocket); Mads shows he’s a team player, perhaps ensures a good exit for himself; William Rich will CEO yet another Vesbridge dog and; the best part, John Roese gets a new soap box (or saves the only one he has left). And Nortel’s shareholders get sold yet another bill of goods. John Roese, you have been a bad, bad boy; your days are NUMBERED!!!!

And you though the Medellin Cartel was good. They are amateurs compared to these operators.

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Mads Lillelund, chief executive of Burlington, Mass.-based Bluesocket, said shedding Pingtel will enable Bluesocket to compete with name brands like Hewlett-Packard Co. (HPQ) and Cisco Systems Inc. (CSCO), which look poised to dominate the wireless LAN market since acquiring several start-ups.

“This sale is to fuel growth,” Lillelund said, “and get deeper into more deals. Our brand is not as well-known, so we don't do as many deals…But we can go head-to-head with these companies. We compete well with them. If we can get to the table with a customer, our win ratio is 65% to 70%.”

Lillelund told VentureWire at the time that Bluesocket needed a solid software play to keep up in a competitive arena.

But on Wednesday, Lillelund said Bluesocket now has 60 employees and has yet to turn a profit. He declined to discuss the company's financial state in detail. The CEO was tight-lipped about why Bluesocket sold Pingtel so quickly, or if the company was in need of some cash, saying only, “We found an interested, motivated buyer.”

It’s called the pre-acquisition divestiture; Bluesocket is a much better acquisition target without PingTel than it is with it. Bluesocket has some pretty cool proprietary technology but the WLAN market is dominated by the big boys; can’t get married to a rich guy if you have a poor boyfriend (PingTel).

The fact that Vesbridge CONNED its way into owning preferred shares means they know the end game. VCs may by devious but when it comes to making money they are not stupid. Bet you to top Vegas odds Bluesocket is sold in less than 6 months (deal already sealed), which is why I don’t think NT paid any money for it. If they did, they are the ones that got conned.

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