Turnstone said its actions were prompted by BellSouth's decision to eliminate budgeting for additional unbundled network element management systems in its DSL strategy. Turnstone had relied on expanding DSL deployment by both incumbent and competitive carriers for its business expansion, and had seen the available market for DSL shrink with each passing quarter. On Thursday, the company announced an inventory write-off of $5.5 million for the quarter ended Dec. 31.

Chief financial officer Eric Yeaman said that no existing hardware products in the company's MX500 CrossConnect line, nor software products in the Onyx management line, were being eliminated. Future R&D will be limited to in-process development on the next generation of copper automation management tools, Yeaman said. He said that Goldman Sachs will actively explore all options with Turnstone, and that no option is being considered preferred over others at the present time.

Turnstone was founded in 1998 by several veterans of Newbridge Network Inc., including founding chief executive Rick Tinsley and executive vice president Eric Andrews.