The future of startup Xanoptix Inc. is looking considerably brighter in light of a strategic alliance with Tyco Electronics, due to be announced later today (see Xanoptix Signs With Tyco).

Under the terms of the agreement, Tyco will resell Xanoptix's XTM product line of parallel optical modules under its own name. It will also buy the guts of the optical modules from Xanoptix and package them itself.

This is quite a coup for Xanoptix, says the the company's CEO, Jim Norrod. "It gives us tremendous revenue opportunity next year," he crows. In fact, on the basis of orders already received, and the agreement with Tyco, he reckons Xanoptix is on track to break even at the end of 2003.

For starters, Tyco has agreed to buy a minimum amount of components from Xanoptix over the next two years. Norrod declined to reveal the exact amount, but did note that it was worth several million dollars next year.

This amount of revenue is unlikely to come from massively parallel backplanes, an application sometimes cited for Xanoptix's modules, bearing in mind that the market for monster, distributed-architecture core routers is in the doldrums at the moment (see Switching Silicon Goes Scaleable).

Still, the reseller agreement with Tyco could give Xanoptix a route into a much broader market. Tyco has "a sales channel all over the world," Norrod notes, adding that it's something startups can't match.

Tyco's backing also removes the stigma of buying from a startup, he adds. Customers that would be wary of buying from a startup would be more likely to buy from an established vendor like Tyco.Another plus point is that Tyco already has the right customer connections. It currently sells 1x12 parallel optical modules under the AMP brand to a number of markets, not just telecom. AMP was a company Tyco acquired for stock worth $11.3 billion back in early 1999. The deal with Xanoptix will allow Tyco to extend its product range to offer 12-, 16-, 32-, 48-, and 72-channel interconnects with aggregate capacities up to 245 Gbit/s (see Xanoptix Lands Cash, Launches Product).

The reason that Tyco is so enthusiastic about the deal, says Norrod, is that it allows the connector vendor to get its hands on the secret sauce inside Xanoptix's modules. Xanoptix calls its technology "optically-enabled integrated circuits," which are chips with both lasers and electronics integrated on the same piece of semiconductor.

"Tyco Electronics believes advanced optically-enabled integrated circuit technology will have a significant impact in optics over the next decade," concurs Kevin Rock, VP of Tyco Electronics’ communications, computer, and consumer electronics products, in a prepared statement. According to Norrod, Tyco has indicated that it would like to develop new configurations of optically-enabled ICs.

Exactly how this partnership will shape Xanoptix's future is not yet clear. The startup is hanging on to its own sales team and packaging facility for the time being, but indicates that this could change. "We could do some interesting things from a manufacturing standpoint and for efficiency," says Norrod.

Key competitors in the parallel optical module market are Agilent Technologies Inc. (NYSE: A), and Infineon Technologies AG (NYSE/Frankfurt: IFX). Startups in the market include Alvesta Inc., AraLight Inc., and TeraConnect Inc.

— Pauline Rigby, Senior Editor, Light Reading
www.lightreading.com