First startup in Telecom Valley closes its doors

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What remains of the first startup in Telecom Valley is closing its doors Friday, ending a chapter in the story of a shrunken telecommunications sector that once employed thousands of workers and brought billions of dollars to Sonoma County.

The Alcatel-Lucent facility in southeast Petaluma is a shadow of what it was at the start of the millennium. But the business, now with fewer than 20 full-time workers, can stake a claim to being the seed from which an entire industry sprang to life in Sonoma County, numbering more than 30 telecommunications companies at its peak.

“It was the fountainhead of all that stuff,” said David Ehreth, a former executive at the Petaluma business when it started nearly three decades ago as Optilink Corp.

All the current Alcatel-Lucent workers in Petaluma will keep their jobs and work from home, as most already are doing, said a spokesman for the French-based company. They include employees doing engineering, technical support and sales.

“The majority of the people that worked there were already working from home. It just became less and less necessary over time for them to keep it open,” Alcatel-Lucent spokesman Mark Hudson said.

Current and former workers will gather this afternoon at the company’s Corporate Circle offices for what an email invitation describes as “One Last Hurrah,” a chance to “offer a toast to the good old days.”

Friday’s closing marks the departure of the last mega-company in Telecom Valley, a term coined to describe the concentration of telecommunications equipment developers that spread from Petaluma to Santa Rosa. While the county continues to house such tech giants as Keysight Technologies and JDSU, gone are companies like Cisco Systems, Nokia and Motorola that entered the county by purchasing a telecom startup.

Despite the declines, some telecom pioneers brush off any talk of gloom. In the years ahead, they foresee a new wave of innovators developing an array of tech products that will provide jobs for workers and good returns for investors.

“We don’t look over our shoulders very much,” said Don Green, Optilink’s founder and the man nicknamed the father of Telecom Valley. “I see opportunities continue to expand.”

Green, 85, a major donor to Sonoma State University’s Green Music Center, started Optilink in 1987. The company was sold in 1990 to DSC Communications for $54 million, which itself was gobbled up by Alcatel in 1998 for $3.3 billion. In 2001, it employed more than 500 workers.

From that single business came an industry that made Sonoma County a major supplier of equipment that connected homes and businesses to the telephone network and the Internet. Green in 1992 founded Advanced Fibre Communications and became an investor in a crop of new startups that sprouted in Sonoma County. Many of the people who joined him in his early ventures went on to form companies of their own, including Cerent, Next Level Communications, Diamond Lane Communications, Turin Networks, Westwave Communications, Calix and Cyan.

Telecom Valley became known in the 1990s as a global supplier of equipment that connected homes and businesses to central telephone networks. But its glory years were brief.

The high water mark came in 1999 when Cisco paid $7 billion for Petaluma-based Cerent. Two hundred employees at the 2-year-old company became millionaires that day, at least on paper, based on the value of their stock options.

About that time the local telecom sector employed more than 12,000 workers, many of them engineers making more than $80,000 a year, double the county’s average wage at the time. But when the dot.com recession struck in 2001, local companies shed 6,000 jobs in two years. Nokia shut down its Sonoma County offices in 2003, a mere four years after its arrival. Motorola departed in 2006, followed by Cisco in 2009 and Tellabs in 2012.

Smaller telecom companies remain in Petaluma today, including Calix, which in 2010 went public in an $82 million IPO, and Cyan, which last month announced its acquisition by Maryland-based Ciena for about $400 million.

Ehreth, a former Optilink vice president and later a general manager for DSC Communications, said the forced breakup in 1984 of AT&T into regional phone companies provided an opportunity for a new wave of equipment makers to enter the market.

“That’s what kicked off the big surge of telecommunications in the 1990s,” he said.

Optilink introduced the Litespan digital loop carrier system, which became one of the most successful products to emerge from Telecom Valley. Ehreth likened the system to an extension cord that provides extra bandwidth from a phone company’s network center out to homes and businesses. It stayed in production by different businesses for two decades until 2012 and is still used by phone carriers today.

Today Ehreth is the owner of Sonoma Brinery, a Healdsburg maker of fresh pickles and sauerkraut. But he nonetheless takes satisfaction in seeing telecom products from Sonoma County still in use.

“They’re all over the United States,” he said.

Green, who counts 30 telecom and other companies that he has invested in, said he is writing a memoir and hopes to complete the book in the next year. What will he say about Telecom Valley?

“I haven’t decided yet,” he said.

You can reach Staff Writer Robert Digitale at 521-5285 or robert.digitale@pressdemocrat.com. On Twitter @rdigit

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