Tellium's Pure Optical Play

Tellium Inc., which filed for a public offering last month, announced today that has completed its acquisition of Colorado-based Astarte Fiber Networks, an optical component vendor that makes 3D photonic switch matrixes (see Tellium Bids for $250 Million IPO). Tellium also announced that the newly acquired company is immediately generating revenue through the license of its patented technology to Corning Inc. (NYSE: GLW).

Tellium plans to use Astarte’s MEMS (micro-electro-mechanical system) technology in its all-optical Aurora Switch products that are currently in development.

According to the S-1 filed with the Securities and Exchange Commission in September, Tellium estimated the startup will cost them about $113 million. A real bargain, considering the fact that Nortel Networks Corp. (NYSE/Toronto: NT) paid roughly $3.25 billion for Xros, another startup that was supposed to help the optical giant develop an all-optical switch based on similar MEMS technology and still hasn’t produced a product (see Nortel: Xros Isn't in Trouble).

Astarte was one of the first vendors to build a 72x72 all-optical switch fabric for use over multimode fiber. The product, which began shipping in April 1999, has been used primarily for enterprise campus applications like video conferencing distribution, data center configuration, training simulation, and hardware test beds, since multimode is constrained by distance and cost limitations. Now the company is developing a fabric to be used over singlemode fiber, which can be used over longer distances, making it ideal for telecom applications.

The most intriguing part of the acquisition is Astarte's patented control technology, which makes the lens and mirrors in a MEMS system rotate and switch the light from one fiber to the next. Corning, a component supplier to Tellium, has agreed to license Astarte's control technology for the development of its new photonic switch modules.

"There are lots of companies out there that can build fabrics based on MEMS," says David Krozier, senior analyst with RHK Inc. "But it is the control system that really determines the actual performance of the device. You have to be able to target the beam on the fiber at the other end and hold it there over time, temperature changes, and vibration. That’s the critical part."

With both Tellium and Corning working on all-optical modules simultaneously, Tellium CTO Krishna Bala says this will help the company get dual sourcing for these components. He also says that the company has no plans to manufacture and sell its own modules to competitors but hasn’t ruled out licensing the technology to other vendors that might compete with them.

Tellium is by no means the only vendor working on an all-optical switch. Competition is pouring in from all sides. Lucent Technologies Inc. (NYSE: LU) and Calient Networks have already announced all-optical switches. And Ciena Corp. (Nasdaq: CIEN), Sycamore Networks Inc. (Nasdaq: SCMR), and Nortel, which all make electrical optical switches, say that photonic switches are on their road maps.

Judging from the recent departure of several Astarte executives, it seems that Tellium is more interested in the technology than the people behind the company. Edward J. Fontenot, president and CEO of the company, has left, and Alan Richards, VP of Engineering, is also rumored to be gone. Tellium executives wouldn’t comment with respect to who has left and who is staying with the company.

“The main thing for us has been to transfer both intellectual property and the real know-how,” says Bala. “We’ve already taken on the entire development at Astarte.”

-- Marguerite Reardon, senior editor, Light Reading, http://www.lightreading.com