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August 7, 2007
Low margins have kept the big optical component players out of the GPON market, but that's not stopping Finisar Corp. (Nasdaq: FNSR) from making a play there.
Finisar first tipped its GPON plans at OFC/NFOEC in March, but the company hasn't been pushing hard for publicity on its efforts. (See Finisar Demos at OFC.) Now, CEO Jerry Rawls tells Light Reading Finisar's GPON experiment is on the verge of liftoff.
"Our expectation is that we'll have qualifiable OLT [optical line terminal] products for sure in about October. My guess is, the qualifiable ONU [optical network unit] products won't happen until about the first of the year," he says.
Fiber to the home is expected to be a high-volume market, but because it's ultimately targeted at consumers, the margins are low. That's not the cheeriest news for an industry where the biggest players keep struggling for breakeven earnings.
One problem is that the ONU -- the box sitting at the customer's house -- has to be cheap; moreover, carriers want ONUs to interoperate, making it easy for them to switch vendors. But Finisar is finding carriers don't want an optics supplier that does just the OLT side.
"We're encouraged to do both, by both the service providers and the equipment companies, because there are no Tier 1 optics suppliers today supplying PON products," Rawls says. "But where its mostly attractive for us is at the OLT end, because that's where value pays off."
Suppliers like Emcore Corp. (Nasdaq: EMKR) and MRV Communications Inc. (Nasdaq: MRVC) might take offense at not being included in the "Tier 1" camp, but it's true that most of the big telecom optics suppliers have avoided PON. JDSU (Nasdaq: JDSU; Toronto: JDU), in particular, continues to say it's not interested in selling PON transceivers.
Instead, the market is occupied by smaller names like Fiberxon Inc. -- which was acquired by MRV and is being merged with its LuminentOIC Inc. subsidiary -- or NeoPhotonics Corp. (NYSE: NPTN) (See MRV Buys Fiberxon, Preps IPO, MRV Sags on Fiberxon Buy, and NeoPhotonics Unveils GPON Transceivers.)
Better known for datacom optics, Finisar is trying to increase its telecom sales -- which is another reason to be interested in GPON. Finisar's other telecom moves lately have included the acquisitions of Azna and Kodeos in the spring. (See Optium, Finisar Bulk Up.)
That datacom heritage might help Finisar in the GPON market, because it means Finisar already makes Fibre Channel and Gigabit Ethernet transceivers. That expertise -- along with the high volumes those devices command -- could serve Finisar well in GPON.
"What Finisar brings to it is that they already have the infrastructure for building high-speed optical devices," says John Harmon, an analyst with Needham & Co. Harmon notes that Finisar really builds the stuff, in its own factory in Malaysia, whereas other big names tend to have transceivers built by a contractor like Fabrinet Co. Ltd. (NYSE:FN) -- which might not want to work at such low margins.
— Craig Matsumoto, West Coast Editor, Light Reading
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