Is This Company Beyond Repair?

Combined with renegotiated leases and other savings, the job cuts would lower Novalux's annual expenses by about $10 million. That would allow the company to operate until mid-2003 without more financing. But here was the catch: Even with lower expenses, Norby's model assumed that Novalux would soon generate revenue. It had to get stuff out the door.

The Future: "There is no correct answer"

"It's time to grow up." Barry Soloway speaks with the authority that comes from having done this many times before. He talks as if he runs the place -- which may be mostly true. Soloway arrived at Novalux in August as senior vice president of product realization. The wording of his title is intentional. It is his job to turn research projects into actual products, to give customers what they want -- to get stuff out the door. Stuff that someone will pay for.

Soloway is an organizational enforcer, a hired gun. He insists that he work only on six-month contracts, and he has done so at a string of technology outfits across Silicon Valley. "I discovered early in my career that I enjoy uncertainty. I like getting into the chaos of a startup and creating pockets of sanity. When things get to the point when, each day, you can predict what's going to happen, then I can step out."

Soloway sees Novalux's revised strategy not as a concession but as a move that plays to its technology's true advantage. Power? Anyone can do power. Real success, Soloway says, comes when you "change the way people think about something." That's what Novalux's shift is all about -- providing lower-cost technology that actually ignites a new market by making metro networks economically viable.

To exploit that "unfair advantage," Soloway had to transform a research organization into a commercial enterprise. And he had to do it quickly too. To supply lasers for amplifiers that will be deployed in networks in 2004 -- when demand is likely to have recovered -- Novalux has to get working prototypes to its customers by the middle of next year.

Job one: Focus. A few months ago, engineers were toying with as many as 10 prospective new products. Thompson likes to compare organizations to rivers, their width always varying with the geography. Well, it was time to build a dam. The 10 products would be narrowed to 2 -- real solutions that customers might actually buy soon. Only two people, Mooradian and business-development director Vincent Schmidt, were allowed even to daydream about other applications.

Soloway installed an investment-review process to provide accountability. Senior managers now meet regularly to assess the business case surrounding each product. Do customers still accept the value proposition? How have sales forecasts changed? What prices are sustainable? What prices do manufacturing yields allow -- and what will those yields be six months from now? What capital resources are required -- and what's the likely return on investment?

None of these, of course, are extravagant questions. But at Novalux, they hadn't been pressed routinely. Soloway made them routine. In place of a random crush of meetings each day, he instituted two -- one first thing in the morning, the other at 5:30 PM -- where managers review operations and assess whether products are still on course. In doing this, Soloway created discipline -- an environment where people take responsibility for delivering results and then make them happen.

All of that did nothing to cure the marketplace, of course. Analysts differ on when demand for optical-networking equipment will return and, when it does, which technologies will prevail. It's not clear whether a low-cost laser can stimulate construction of local networks, as Novalux suggests it will. Also, competition to supply new technology is incredibly fierce. There are dozens of Novaluxes out there, waiting for business to return. "Will many of those startups still be around when it does?" asks Blaik Kirby, a telecommunications expert at consulting firm Adventis Corp. "Probably not."

But by November, Novalux at least understood how to make lasers that equipment makers would buy, and how to get those products out of the building. It knew how it would bring manufacturing costs down in a way that would allow steep price cuts. It was building an outfit conceivably capable of churning out new, leading-edge lasers for many different applications, as Mooradian imagines. It had fixed what it could fix.

Except for one last thing. On November 17, Thompson told his employees that he was resigning as chief executive. He had given all of his ideas to the company, he said, and "in the evolution of every company, there comes a time when it's not a bad thing to have new ideas." The board wanted someone who had telecom experience, a player who had relationships in the industry. "We mutually concluded that Malcolm was not the best guy to run the company in its next leg," Gill says. Ian Jenks, a Novalux director, would take charge as CEO.