Pannaway CEO Mark Carpenter offers some rationale for Enablence's strategy. Most of Wave7's business was overseas, he says, so Pannaway gives Enablence an FTTx business that's more established in North America.
And Pannaway plays into Enablence's vertical-integration model, as seen in the acquisition of Wave7. It's pretty clear Enablence has decided vertical integration is the way to go for optical components, particularly for its planar-lightwave circuits.
What makes Enablence's moves a little uncomfortable is the still-fresh memory of Corvis buying up carriers. (See Corvis & Broadwing: Together At Last.) One major difference: Pannaway hadn't used Enablence's components before. Carpenter thinks a better analogy for Enablence's vertical climbing is the way JDSU (Nasdaq: JDSU; Toronto: JDU) went beyond components to get into subsystems. Of course, JDSU's 60 percent stock drop in five years (measured before the stock market collapse of October) might not be the kind of result Enablence wants.
Infinera Corp. (Nasdaq: INFN), which developed a chip and built the system that uses it, might be a better analogy. (See Infinera Declares WDM War.) Like Infinera, Enablence might be thinking the best way to make sure its technology is used to its potential -- and the best way to wrest value from it -- is to become a systems play.
Given that the optical components business hasn't gotten much easier, maybe vertical integration is the industry's future. Larry Schwerin, CEO of Capella Photonics Inc. , has brought that up in conversation -- but he doesn't mean Capella is going to go buying up ROADM systems vendors.
Carpenter says it's "too early to be specific" on how Enablence plans to juggle two fiber-access companies, and he won't be offering more details at his TelcoTV keynote on Thursday. He's already prepared a talk about getting services revenues out of broadband.
— Craig Matsumoto, West Coast Editor, Light Reading