Late Tuesday Tellium Inc. tentatively set the price range for its initial public offering at $13 to $15 per share, with 17.5 million shares expected to be offered to the public (see Tellium Bids for $250 Million IPO).

Lead underwriters, Goldman Sachs & Co. (NYSE: GS) and Thomas Weisel Partners have not yet set a specific offering date. But the company is expected to debut by the end of this year.

If the deal is priced at the high end of its range, it would raise $262.5 million for Tellium, which already has $253 million in cash in the bank.

Tellium, which makes optical switches, is one of the first optical system vendors to venture into the IPO market since it has cooled off from the summer. A revenue shortfall from Nortel Networks Corp. (NYSE/Toronto: NT), analyst predictions that capital spending for carriers will slow down in the coming year, and general turmoil in the stock market have all sent an even deeper chill through the IPO market (see Nortel's Fright Night and Analyst Report Defends Optical).

Because no optical systems vendors have gone public recently, it is hard to predict how Tellium will do in this climate, say analysts. CoSine Communications Inc., which makes virtual private network (VPN) services equipment, performed well on its first day at the end of September, almost tripling its value (see CoSine Soars On Debut). Originally priced at $23, the stock rose to $63 on its first day of trading -- but it has since slid back to $27. Advanced Switching Communications Inc. (Nasdaq: ASCX), a broadband access switch vendor, has had an even more dismal experience on the public market. Shares were priced at $15 for its debut and only went up to $18. Today they are trading at $13.

Optical components have also had less than stellar receptions. Oplink Communications (Nasdaq: OPLK), for example, priced at $18, went up to $33 its first day, and is now trading at around $25 (see Oplink Soars on Market Debut).

Tellium is not expected to shoot up to the same levels that ONI Systems Inc. (Nasdaq: ONIS) and Corvis Corp. (Nasdaq: CORV) did this past summer. But Tim Savageaux, infrastructure analyst for W.R. Hambrecht & Co. says he thinks the company could at least double its price on the first day (see Avici and Corvis Make Stunning Debuts and ONI Valued at $10 Billion in IPO).

“We’ll probably see something moderate that will leave some upside going forward,” he says. “When you look back, Corvis and ONI were not good buys on the first day; they have come down a lot since then. But if anyone is going to pop up there again, it could be Tellium."

Savageaux cites the company’s string of big contract wins from Qwest Communications International Corp. (NYSE:Q) and Cable and Wireless (NYSE: CWP) as a positive driver that should give investors more confidence in the company (see Is Tellium Ready for an IPO?).

“They have a strong customer base,” he adds. “They’ve shown that they can be competitive with Sycamore and Ciena and that is a real validator.”

Savageaux finds one thing worrisome, however: Tellium has given nearly $10 million worth of stock options to seven unnamed Qwest officers, which can be exercised 90 days after shares begin selling on the public market, according to the amended S-1 filed yesterday with the Securities and Exchange Commission.

“When you give shares to individuals, you start getting closer to a line you shouldn’t cross,” he says. “It’s definitely something you would rather not see.”

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