ADC Tunes Out
On the plus side, this doesn't mean that ADC is getting out of the tunable laser business altogether. Manufacturing operations from Järfälla will be transferred to ADC's other tunable laser manufacturing site in Minnesota, the company says.
On the minus side, most of the 150 or so Järfälla employees will lose their jobs. ADC hasn't reached "a final resolution" on what will happen, but it is likely that only a few employees will be offered the option of transferring their positions to Minnesota.
"The market for tunables isn't there," says Rob Clark, ADC's director of public relations. "Clearly, demand doesn't warrant two facilities worldwide, so we've got to scale back."
Those close to the layoffs say it is a hefty blow for Sweden's industry. "This is like dropping a bomb in telecom-Sweden," says an optoelectronics worker, who asked not to be named. It is the second shutdown notice in one week: Ericsson Microelectronics has just been sold to German Infineon Technologies AG (NYSE/Frankfurt: IFX), and its Swedish optocomponents fab is also to be closed (see Infineon Buys Ericsson Microelectronics).
However, for ADC, the move seems necessary to put the company back on track towards profitability. Its goal is to break even at $300 million per quarter in sales, which analysts, including Rick Schafer of CIBC World Markets, don't believe will happen until 2004. "We applaud the effort to cut costs," he wrote in a recent research note. "But gross margins must jump from 2Q's 25% to about 38% and operating expenditure must fall to $155 million from 2Q's $157 million to be profitable at that run rate."
ADC joins a growing list of vendors that have found the tunable laser market to be less robust than they had hoped it would be. Startup Bandwidth9 Inc. laid off 60 percent of its staff recently, saying that demand for tunable lasers hasn't materialized (see Bandwidth9 Behind Schedule?). And the manufacturing plant at well funded startup Agility Communications Inc. is reportedly a "ghost town" -- although company management denies that it has made cutbacks or is facing significant problems.
Only a few vendors -- notably, Fujitsu Network Communications Inc. (FNC) -- say they are seeing any significant sales of tunable lasers. In Fujitsu's case, it is helped by the fact that it has a captive components division, which supplies lasers exclusively to its systems group. And the systems group has decided to exorcise fixed-wavelength lasers and only ship equipment carrying tunables.
ADC refuses to comment on exactly how many tunable lasers it's shipping right now. "ADC has never broken out our products or divisions by revenues," says Clark, the implication being that it's not going to start now. "I think our action shows what our position is."
— Pauline Rigby, Senior Editor, Light Reading
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