Life has gotten more complicated for Enablence Technologies Inc. (Toronto: ENA) in the past two years as the optical components company has acquired suppliers and possible competitors, but the company's chief executive says that's the future of this sector.
Arvind Chhatbar defends the acquisitions of fiber-to-the-home systems companies Pannaway Networks and Wave7 Optics Inc. as representing the vertical integration that a transceiver company like Enablence has to have.
"If we decided to remain a single-product transceiver supplier in the marketplace, our life would be very short," Chhatbar tells Light Reading.
The Canadian company has been trying to build its name on planar lightwave circuits (PLCs), integrated devices that don't require the amount of manual assembly of traditional optical components. Like everyone in the sector, though, Enablence has been having a difficult time of it.
The company acquired suppliers Albis and ANDevices in 2007, but the Pannaway and Wave7 moves were what really caught people's attention. It's reminiscent of the waning days of Corvis, when it acquired customer Broadwing in 2003, letting the original Corvis equipment fade out afterward. (See Corvis & Broadwing: Together At Last and Broadwing to Sell Corvis Business.)
That's not Enablence's plan, Chhatbar says.
The problem, to steal a catchphrase, is that optical companies don't get no respect. Too many companies are selling to what's been a dwindling pool of systems companies, a trend that keeps margins pushed downward. (See Optical Components: Still Too Crowded.) A part that's lower cost, or that emits less heat, doesn't necessarily gain the components company any price premium, Chhatbar says.
"The only way to do this is to be vertically integrated, backwards and forwards. When we do forwards integration, it obviously is associated with customers. How else can I do it?" he says.
By owning systems, Enablence can also get a head start with carriers, "instead of waiting for, say, Verizon Communications Inc. (NYSE: VZ) to issue an RFP that the Alcatels and others try to respond to, and they wait for that to be accepted, and then go to the components level," Chhatbar says. "If we did things like everybody else, we would not have the necessary competitive edge"
In a sense, Enablence's moves are similar to what Infinera Corp. (Nasdaq: INFN) did. Infinera's real product is the indium phosphide (InP) chip that integrates handfuls of optical components. But to make sure the chip got used to its fullest potential, Infinera built the system that goes around the chip. (See Infinera Declares WDM War.)
There's still the fact that Enablence is small and has never been profitable. Enablence finished its third quarter, which ended Jan. 31, with cash and equivalents of CDN$18.6 million (US$16.1 million), compared with CDN$32.2 million (US$27.9 million) three months earlier.
To pick up more cash, the company priced an offer on April 30 to sell 40 million stock shares at CDN$0.30 apiece (26 cents U.S.), which multiplies out to CDN$12 million (US$10.4 million).
Investors recently got a bit of good news when Enablence announced Fujitsu Ltd. (Tokyo: 6702; London: FUJ; OTC: FJTSY) as a customer. (See Fujitsu Selects Enablence.) "It is going to be a series of components that are PLC-based, mostly for the metro and long-haul markets, not fiber to the home," targeting Asian and North American carriers, Chhatbar says.
That would suggest it's a deal for ROADMs components, which one source outside Enablence confirms. That source also pins the value of the deal at less than $3 million; Chhatbar won't disclose any numbers related to the deal.
"With the introduction of our second generation 40 Gbps units we’reimproving optical performance and reducing the physical size of the 40Gbps units by 50% as compared to our first generation 40 Gbps cards previously announced in June 2007. Our sizeable investment in coreoptical R&D provides Fujitsu with a substantial advantage in thedevelopment of high speed photonics"
Today ENA can provide complete end to end solution for FTTX and we can directly bid for any RFQ for FTTH deployment anywhere in the world with our own products and our own EMS software that allows the customer to practically have a 'turn key' solution. We also have products such as ROADMS for the metro market. When we are able to provide this in larger quantities this will be a important source of revenue. Each ROADM sells for anywhere between $6K and 9K and each use our PLC chip. And there are more products as you can see from our new website.
We can no longer be called a speculative stock with our sales this calendar year upto July already in $10M range and year is not over yet!
ENA is fast becoming an important force in this business and we possess the technology superior to the others. Of course, it will take time to build all this to the level needed but we are well on our way. This year is our growth year and coming of age.
Thanks for your continued confidence and support in good times and bad.
I thought nobody but JDSU and Neo are making 2-degree PLC ROADMs any more, driven by Cisco's 15454 demand. Everyone else has switched to WSS based ROADM. Am I missing someone in that game?
There are three suppliers of WSS, two of PLC ROADMs, and thats the end. Right?
Since I know people involved into Enablence since they were 3 people worth company, then ANDevices and W7O investors, I can say that almost all the $$ come from AND, while other businesses are happily losing $$.
I agree that PLC business needs some integration, for they will not survive on their own: merge Gemfire, Kotura, AND, Neo (San Jose)and JDSU/Milpitas into one company (not under JDSU wing, but someone smarter) and you would get $50-60M worth of business maybe even with a chance of public offering in good days to come. I've been out of IOC for too long, have I missed any true PLC players? System companies are not counted.
Listen mate, I understand your post, I am just not sure why it says "to Zu Ping:" at the top of your reply. I am assuming your response was to danp5648, or to madoff. At what point did I say anything positive about Gemfire? Your response is for someone else right (madoff)? You know where I used to work, obviously. Key word, "used." As in past tense. I cannot contradict anything you say. If things are so great over there, then why am I working for another company, in another industry?
Dan the only thing I would believe from you is the best pizza between Caligiuri's & Tommasos, my guess is that Tommasos is your favorite, but then again Matts pizza has better ratings, other than that your all hype.
Take a peek at you past, deal with it Dan, Enablence will only stay a penny stock level until they decide to dump the components mentality.
Dan you have been duped.. deal with it. Why do you insist on believing that your hope to increase the value of your shares will be by the choice of spam you produce. it don't work that way. Enablence will only survive when they divest all their components portfolios, plain and simple. If they do this tomorrow their stock may be close to $5.00 per shar by year end, this is predictable.. do the MATH on speculation.
some of your past visions.
The idea is E is going end that TO-can process once and for all.
revenue for the 3 M&A companies is approx. $28M US
Wave7 Optics raised $99 million plus ANDevices about the same Enablence did about 90 million too.
So how much did you say the the burn rate was again?
I asked for current total burn rate numbers so far for Enablence not a clearly made up number for all 3 businesses and the unknown 4th and 5th yes 4th and 5th businesses. Do you have ANDevice customer list? If you don't know how big ANDevices which we both agree on how can know anything about the other two? And no bars is not a legitimate or valid place to gather information about balance sheet information.
"A comment on how big Andevices is... dan, dan.. hello.. they are DINKY.. ok.. they ship product from the lobby.. remember this. If you ever get a chance to be in the bay area check it out, go to the lobby and pretend your looking for someone on a friday when a month ends towards the time UPS comes around.
Vertical integration not only allows IPG to enhance innovation by controlling all the specs of its products, but also to lower costs and keep its lead over competitors
Flat may be trendy, but there a lot of advantages to being vertical -- and recognizing them can be critical for investors who want to look past the flavor of the week and find businesses with lasting advantages.
Your ideas are a few years old and we all have moved on even Enablence has moved on to a global scale. That's way you don't dare comment on the new wave press releases because it so uncomfortable to accept its better believe its not happening. Enablence last PR was about Egypt so ... and you also denialed away the insider buying activity I just posted.
Wiki on denial:
Denial is a defense mechanism postulated by Sigmund Freud, in which a person is faced with a fact that is too uncomfortable to accept and rejects it instead, insisting that it is not true despite what is overwhelming evidence.
Here's an idea.. Enablence dumps Andevices and sells the machines & customer base to gemfire.
Gemfire dumps scotland and keeps the andevices equipment .
Gemfire buys through residue contract Neo's AWG customer base.
Now you have a solid positive cash flow, no need for andevices management or cost from neo for overhead including marketing, sales, etc.
Basically combine three and eliminate the overhead from Andevices & some office support from Neo, which I think they would be glad to rid since they have better fish to fry from their portfolio.
three customer base line converged into one and eliminate the burn machine from andevices.
nevermind the stock BS, make some money first then go public with some confidence otherwise you will be another enablence!!!! and I'm not talking about positive cash flow in the hundreds of dollars,
Lol, Gemfire has got to be close to profitability?? are you joking? Look what a mess they made of the vaunted merger with Covega. Look at the track history over the last year.. shut down's for weeks due to being out of cash!
If they had not dumped Covega for a loss to Thor Labs and gotten some cash back, they would be in even worse shape. They talk a big game of strategy shifts, first by merging with Covega to get access to InP and Lithium Niobate technology to integrate with their AWGs to make PIC... then they dump Covega because they cannot pay the bills and say now we have "new" strategy and strategic vision and are changing our company yet again.
Sounds kind of like other companies chatted about on this board doesn't it?
Zu, however, if you know better, or have contraindicating information, please share it. I for one would like to see someone in this space making a go of it. But don't think it is Gemfire. Prove me wrong please.
"Arvind Chhatbar, President and Chief Executive Officer, Ronald Benn, Vice President, Finance and Stephen Bower, a director of the Corporation subscribed under the Offering for an aggregate of 6,866,667 common shares for gross proceeds of $2,060,000."
Shows 13,500,001 shares where purchased or given to Bower and Arvind. So the press release was wrong and its not an aggregate but each will buy 6,666,667 shares.
May 19/09 May 12/09 Bower, Robert Stephen Direct Ownership Common Shares 15 - Acquisition under a prospectus 6,666,667 $0.300 May 14/09 May 12/09 Benn, Ronald Irving Direct Ownership Common Shares 15 - Acquisition under a prospectus 166,667 $0.300 May 14/09 May 12/09 Chhatbar, Arvind Direct Ownership Common Shares 15 - Acquisition under a prospectus 6,666,667 $0.300
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Fujitsu Selects Enablence Part II
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