The once glamorous market for all-optical switching components appears to be winding down like a coke-addled disco party.

OMM Inc., which was arguably one of the leading players in all-optical component technology, announced today that it will shut down on Friday, laying off all 85 of its remaining employees.

The subsystems vendor had been trying to secure extra financing. The idea didn't seem like such a long shot, considering the company had a shipping product and paying customers.

The company builds all-optical switching devices based on micro-electro-mechanical systems (MEMS), tiny switches based on tilting mirrors. Its devices are based on 2-D MEMS -- that is, they've got mirrors that can sit in two positions, "on" or "off." A grid of these mirrors forms a crossconnect, with connections created by popping the mirror into the "on" position.

"They had traction -- not just minor second-tier companies, but companies like Ciena Corp. [Nasdaq: CIEN], Alcatel SA [NYSE: ALA; Paris: CGEP:PA], and Siemens AG [NYSE: SI; Frankfurt: SIE]," says Lawrence Gasman, president of research firm Communications Industry Researchers Inc. (CIR). "If you'd asked me to bet a couple of weeks ago, I would have said they'd get some money."

But most of OMM's work was still going into lab trials rather than live networks, Gasman says. In the end, that wasn't enough for the company to overcome its overhead.

"This business is not a shoe-string operation. It was scaled quite large at the request of our customers," says Phil Chapman, OMM's CEO. "We scaled down as much as we felt we could. There was some venture interest, but basically we were running out of time. Rather than run into a wall, we decided to stop at a point when we had some cash reserves.”

OMM's last hope would be an 11th-hour reprieve à la NeoPhotonics Corp.'s rescue of Lightwave Microsystems (see NeoPhotonics Acquires Lightwave Micro). "There are a lot of people that know what we've created here, so we'll see," Chapman says.

Initially named Optical Micro Machines Inc., OMM was one of the last survivors in the market for MEMS-based switching subsystems. Onix shut its doors last year (see Components Casualty Count Climbing), and Integrated Micromachines Inc. (IMMI) shelved its optical switching product in favor of becoming a contract manufacturer for MEMS in general.

OMM also took a stab at the more elaborate 3-D MEMS technology, where mirrors can pivot to divert light to any output port. In 1999 and 2000, several startups dreamed of using 3-D MEMS to craft 1,000 x 1,000 switching elements. The poster child for the idea was Xros, acquired by Nortel Networks Corp. (NYSE/Toronto: NT) in a stock deal then worth $3 billion (for some Bubble nostalgia, see Xros Launches First 1000-Port All Optical Cross Connect and Nortel Spells Out Its Cross-Connect Strategy).

Chapman describes the 3-D MEMS foray as a "hurry-up effort" funded by potential customers, and he says it was always considered to be separate from OMM's bread-and-butter business in 2-D MEMS.

In any event, the market for 3-D MEMS never emerged. By mid-2001, potential customers such as Luxcore Networks Inc. and Ilotron Ltd. were leaving the market, and OMM downshifted to concentrate on smaller switching devices (see OMM-inous News).

Unfortunately, OMM had been beefed up by then, in hopes of going public. In the end, it wasn't able to slim down enough to withstand the downturn.

The only question now is: Can a new generation of all-optical technology stage a revival?

The vision of the all-optical switch lives on. Continuum Photonics Inc. moved into a new 24,000-square-foot facility in October and will unveil its optical-switching subsystem during the first half of 2003, according to the company's Website (see Fresh Money for New Materials). Non-MEMS efforts continue as well, from folks such as Richard Laughlin, founder of Optical Switch Corp. (see Who's Gonna Have the Last Laughlin?).

Subsystems maker Network Photonics Inc. is still in the game, too. "They're sort of higher up the food chain. [Their products] have more intelligence," says CIR's Gasman.

On the systems level, Calient Networks Inc. and Movaz Networks Inc. continue to carry the torch, both of them claiming inroads with Taiwanese carrier Chunghwa Telecom Co. Ltd. (see Calient Touts Government Test and Chungwa to Test Calient Switch).

Despite the ongoing activity, Gasman says it's clear that optical switching won't be a motherlode for components makers any time soon.

"The optical crossconnect is looking like a specialized market where there could be very few players -- or perhaps, for the next couple of years, zero," Gasman says. "MEMS is part of the optical crossconnect story, but it's going to evolve slowly."

— Craig Matsumoto, Senior Editor, Light Reading



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