The decision by American communications giant
(NYSE:LU) to close down Israeli startup WaveACCESS, which it bought just two and half years ago for $60 million, resulted from financing considerations alone. So say business sources in the company.
Lucent recently announced a reorganization plan, which was to include the closure of WaveACCESS, which employed a staff of 70.
The sale of WaveACCESS, for a market related price in today's terms, would no doubt bring in far less money than it cost to purchase the startup originally. In addition, it would force Lucent to report a loss that would negatively affective its operating profit.
In contrast, closing the company down gives Lucent a tax advantage that it wouldn't have been able to enjoy if it had sold the company for a loss.
Since January 2001, and for two months afterwards, the startup's CEO and founder Menashe Ezra tried to find a way to avoid closing down the company. But his efforts failed, and in the beginning of March, Lucent took a decision to close the firm for good.
Sources say that another possible reason for deciding to close the startup is Lucent's desire to avoid embarrassment should it sell off the concern to someone else, who would then turn it into a great success.
On the surface at least, it seems as though WaveACCESS's business was succeeding. The company developed high-speed systems for the growing wireless data communication market, on wireless platforms. It had at least one successful installation in South America.
Company sources say that WaveACCESS finished the year 2000 with sales of more than $10 million, and add that the Israeli subsidiary showed a year-end profit. That's despite the fact that its overall activities were still not profitable.
Sources also point out that WaveACCESS's success was never guaranteed, especially since the merger of its competitors
No official response on the matter has yet been received from Lucent.