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Ailing Sycamore says it will wind down operations

Sycamore Networks Inc., once one of the state’s hottest young companies of the telecommunications boom, plans to sell off its remaining business and wind down operations.

The Chelmsford company, founded in the late 1990s by high-profile entrepreneurs Dan Smith and Desh Deshpande, said it signed an agreement to sell its telecommunications hardware business for $18.75 million and accelerate its “pursuit of strategic alternatives” for the company’s software business.

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Sycamore also said its board had approved a plan to liquidate the company in an “orderly wind down,” once its assets had been sold.

“After careful consideration of the company’s strategic alternatives, we believe these actions are in the best interest of Sycamore’s stockholders, as well as its customers and employees,” said Smith, the company’s chief executive.

The asset sale and the dissolution of the company are subject to stockholder approval.

Sycamore Networks went public to great fanfare in 1999, thanks to a boom in the telecommunications industry and the track record of its founders.

Smith and Deshpande had made a fortune for investors when they sold their previous company, Cascade Communications, for $3.6 billion three years earlier.

Sycamore raised more than $1.8 billion from investors when it went public and sold additional stock the next year.

The company’s business grew briskly for a few years, but soon slumped with the rest of its industry and never recovered.

Sycamore’s hardware business limped along, but the company continued to hoard the vast sums of cash it had raised in earlier stock offerings.

Three years ago, the company generated sales of $67 million but held $627 million in cash and short-term securities.

Sycamore began to return large portions of that cash in a series of special dividends declared over the past three years — a combined $26.50 per share in three separate payouts.

On Tuesday, it declared another special distribution, for $2 per share, and said shareholders would receive whatever cash remained once the remaining assets had been sold.

Sycamore shares, which traded at a split-adjusted high of $275 per share in 2000, closed Tuesday at $5.98.

Steven Syre can be reached at syre@globe.com.
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