Company News — Hyperchip Inc.

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Buyers aim to revive Hyperchip

Tuesday, October 19, 2004

Former local high-flying router firm Hyperchip Inc. is no more.

On Sept. 30, the company's assets and intellectual property were sold to a numbered Quebec company, The Gazette has learned. Hyperchip now exists only as an empty shell with millions of dollars in liabilities.

Three buyers - Hyperchip co-founder Richard Norman, Investissement Quebec and TechnoCap - have bought the firm's assets.

In a telephone interview, Norman did not disclose the purchase price but said it was significantly below the $36-million debt load the company was carrying at the time of the sale.

The owners of the new entity hope to build on the router technology developed by Hyperchip and turn the new firm into a viable business in the near future.

Norman declined to provide details about the new company's plans, but said it plans to go into "stealth mode."

"You probably won't hear much for us for a little over a year," he said. "We'll disappear from the radar screen ... until 2006, and then suddenly we'll pop up again."

During the high-tech boom, Hyperchip set the local telecom scene abuzz with plans to build revolutionary ultra-high-speed Internet gear.

The feisty Montreal startup dared to take on Cisco Systems Inc. and Juniper Networks Inc., the two dominant players in a global core router market worth $1.5 billion U.S.

Founded in 1997, the company raised $220 million in financing, including $50 million from Investissement Quebec, the province's economic development agency - without signing a single customer.

The firm developed a router with impressive technical capabilities, but the gear was deemed too advanced and expensive for the North American and European telecom markets.

Carriers in these two markets had already weathered a few turbulent years, and were unwilling to bet on Hyperchip.

In June, Hyperchip found itself in an untenable situation: It was running out of money.

In a last-ditch effort to keep the company afloat, the firm laid off half its staff, shook up senior management and appointed local turn-around expert Dominic Deveaux as president and chief financial officer.

At the time, Deveaux told The Gazette the firm was trying to raise $30 million to $60 million U.S. in venture-capital financing for trials of its routers with telecommunications networks in China and the Middle East, with the ultimate goal of signing some of these carriers as customers.

In an interview yesterday, Deveaux - who ended his association with Hyperchip on Sept. 30 - noted that the firm received some positive responses from U.S. venture capitalists, and conducted a successful trial of its router with a Chinese carrier.

But it was too late. Hyperchip could not hold out any longer for a fresh infusion of investment funds, he said.

Telecom analyst Jennifer Liscom of Gartner Inc. said yesterday China could provide some opportunities for the company that now own's Hyperchip's router technology.

"The Chinese market is extremely price-sensitive," she said. "If they could get into a major (carrier's network) and reduce the price below Cisco's or Juniper's price ... there is potential.

"It certainly makes sense for them to try to go after that market and do something like that."

Hyperchip's Norman said the new firm will be moving from Rene Levesque Blvd. to a smaller office space. Built in 1892 by the Roman Catholic Church, the imposing stone building was originally used as a place to minister to the poor. During Hyperchip's heyday, it was turned into a 12,000-square-foot workspace designed in accordance with the Chinese philosophy of Feng Shui and featured a massive, moon-shaped galvanized-steel coffee bar.

"This space is overkill for us now," Norman said.

Once home to more than 370 workers, Hyperchip employed fewer than 10 people at the time of the sale. Norman said some of those employees have gone over to the new company, but a handful lost their jobs.

Calls to TechnoCap and Investissement Quebec were not returned.

amacgregor@thegazette.canwest.com

© The Gazette (Montreal) 2004

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