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Startup ditches switch strategy in favor of selling subsystems
July 9, 2001
BALTIMORE – NFOEC – At the OFC trade show in Anaheim earlier this year, Luxcore Networks Inc.'s all-optical switch won a brace of awards from Lightwave magazine.
At the NFOEC show in Baltimore here today, Luxcore announced that it was getting out of the switch market -- for good.
What a difference four months makes in optical networking.
Luxcore has ditched the switch in favor of trying its hand at selling optical subsystems -- which it had been developing for use in its own product -- to other systems vendors.
But why? Because VCs and investors told it to, mainly. "Developing a box play would have required $120 million in investment. Fourteen months ago you could have got that sort of money in a week. Now, not," says Richard "Rick" Black, president and chief operating officer at Luxcore.
By switching its R&D focus from switches to subsystems, Luxcore can cut development costs by 70 percent, Black says. A substantial proportion of those savings will come from laying off the engineers that were working on the switch: Luxcore shed 30 percent of its workforce last Friday.
The company is currently negotiating a Series B round of funding. It hopes to secure $35 million within "the next four to six weeks," he adds. Black joined the company in March -- curiously enough, at around the time that it was celebrating its Lightwave triumph. He also holds management positions or is on the boards at a slew of other optical component companies.
Luxcore also will be able to recognize revenues faster by selling subsystems, it claims. "The cycle for selling switches to service providers is extremely long and difficult," says Gerald Ramdeen, Luxcore's chairman, CEO, and CTO. "If we'd stuck with the switch, we wouldn't have made money until early 2003." Now, the company expects to start selling subsystems in April or May of 2002, and reckons it will generate "more than $40 million of revenue" in its first year.
Luxcore's claim to fame is the ability to reduce the need for OEO conversions on transport networks -- and, by extension, the cost of deploying those networks -- using a technology called all-optical wavelength conversion (see Luxcore to Demo Optical Switch Advance).
It's now planning to package its all-optical wavelength conversion components into subsystems along with MEMS (micro-electro-mechanical system) components from third-party suppliers, and then sell them to switch manufacturers. Luxcore says potential customers include vendors of all-optical switches, such as Calient Networks Inc. or Nortel Networks Corp. (NYSE/Toronto: NT), or companies working on hybrid electrical/all-optical switches, such as Ciena Corp. (Nasdaq: CIEN)and Tellium Inc. (Nasdaq: TELM).
It seems that Luxcore will face competition for these customers. A company called Lightbit Corp. also is reportedly working on a form of wavelength conversion components. Lightbit's Website says that its products are based on patented technology developed at Stanford University. Oddly enough, Luxcore's Ramdeen also has told Light Reading in the past that his technology was developed at the same house of learning.Further, at the NFOEC show here, a startup called Optovation also exhibited a wavelength converter module.
— Stephen Saunders, Founding Editor, Light Reading
http://www.lightreading.com For more information on NFOEC, please visit the Light Reading NFOEC Site.
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