Noam Lotan

“The difference between me and Wu-Fu Chen is that he moves on. I’m in it for the long run.”

March 20, 2000

7 Min Read
Noam Lotan

The Light Reading Interview

In The Spotlight: Noam Lotan

Noam Lotan photoUntil recently, Israeli outfit MRV Communications Inc. was pretty much an unknown in the US. But its decision to focus on optical networking technologies and startups is making it a fan favorite with investors -- and sending its stock [symbol: MRVC] through the roof. It went up from $5 to $194 in the space of a year before getting nailed in last week’s shakeout. Now, Noam Lotan, president and CEO of MRV, talks to Light Reading about:

* MRV’s optical strategy
* How to succeed as a latecomer in the terabit router market
* The new companies he’s funding
* Forthcoming IPOs – and which hot optical stocks he’s buying
Light Reading: Welcome to Light Reading

Lotan: Thank you. Light Reading is a good name. You guys are like Cliff Notes for tough optical technology.

Light Reading: Thanks. I guess. Talking of names, what does MRV stand for?

Lotan: It’s an acronym made up from the names of the two founders: [Shlomo] Margalit, and Rav Noy. Sometimes we tell people it stands for other things.

Light Reading: Such as?

Lotan: ‘Multiple re-entry vehicle,’ ‘most reliable vendor,’ ‘maximize revenue and value.’ And we recently added a new one: ‘my retirement vehicle.’ [Laughs]

Light Reading: That’s right; your stock has gone ballistic, hasn’t it?

Lotan: It’s a new experience for us. Nasdaq called me a little while ago to ask me ‘what’s going on?’ because the stock jumped from $115 to $135 in a morning. The reason was that we announced that all our investments from now on would be optical, and we announced an acquisition.

Light Reading: Who did you buy?

Lotan: ‘FOCI,’ a component company based out of Taipei, with 2 facilities in Taiwan and one in China. FOCI stands for Fiber Optic Communications Inc. []. It’s the plural of focus. I’m not sure how it’s pronounced, ‘though. We’re going to make a decision on that and then tell people how to pronounce it on our Web site. We’re getting 40,000 hits a day on the site, incidentally. People have found us. Customers found us ages ago. Now the investors are catching up.

Light Reading: How much higher do you think your share price will go?

Lotan: I don’t know. You could have asked me that when it was at $5 and I didn’t know then. What do I know about the market?

Light Reading: Tell us about MRV. It’s basically an Israeli VC, right?

Lotan: Not so much a VC. More like a company of companies. We create and manage companies. Basically, we are a combination of an operations company and a parent company that incubates smaller companies.

Light Reading: So how does that differ from a VC?

Lotan: VCs go out and invest in companies and know that most of them will fail. Our goal is not to have any failures. You might call it a distraction.

Light Reading Can you explain how you work?

Lotan It’s simple. We come up with an idea and we get the people together and we declare them founders and we fund them. Later we might bring in VCs. We’re also very, very technical. I’m the only non-PhD on the board.

Light Reading: Do you see similarities between yourself, personally, and Wu-Fu Chen? (See Wu-Fu Chen )Lotan: The difference between me and Wu-Fu Chen is that he moves on. I’m in it for the long run. But I have a lot of respect for him.

Light Reading: Has MRV always been involved in optical networking?

Lotan: Oh yes, we’ve always been in optics. In the early nineties, when optics was a sleepy area, we decided to branch out into the networking arena, so we started Nbase []. We didn’t call it MRV because we didn’t want to annoy Cisco. It was, and still is, a big customer of ours. As are Nortel, Alcatel, Extreme, and Foundry. We still sell huge quantities of long-reach optics to them.

Light Reading: How did your move into networking work out? Lotan: Well, we made our mistakes. Take stackable switches. We got into them, they became a commodity, and we had trouble competing. We outstayed our welcome in that market. But it wasn’t a bad move, overall. As a result of diversification we became familiar with a lot of different technologies. And we created or acquired a lot of technologies that are now critical.

Light Reading:How many companies does MRV run now?

Lotan: The whole group is fourteen companies, but we’re only talking about six or seven right now.

Light Reading: Let’s talk about them. What can you tell us about Charlotte’s Web? []

Lotan: They’re going right into the Juniper, Avici space. They’re building a terabit router. Light Reading: Tough market for a latecomer.

Lotan: Ah, but there’s a twist. It’s a terabit router, with huge capacity, and tiny size -- but the twist is it has a TDM-like capability that also lets it act as a router for Sonet traffic, offering the equivalent of leased line service. Also, the router code comes from the Internet Engineering Group, a company that was later bought by Cisco to take them out of the market, and so that Cisco could incorporate the software in its own products. That means The Charlotte’s Web product and Cisco products should work well together.

Light Reading: What’s your plan for Charlotte’s Web? IPO or Acquisition?

Lotan: It’s a little too early for an IPO. But it could happen because they are very close to having beta customers. There are some new carriers that are waiting for the product, and the ASICs have been working since May [1999].

Light Reading: Do you have anything else that is scheduled for IPO? Lotan: The MRV Optical Access Division is scheduled for an IPO after we integrate it with FOCI. FOCI makes passive optical components -- couplers, filters, modulators -- for DWDM. MRV already makes active components -- lasers and so on -- for coarse WDM. It’s a great fit.

Light Reading: What can you tell us about Zuma Networks? []Lotan: Zuma is a next generation Foundry or Extreme product. It’s a gig Ethernet type play. Zuma is building a machine that can run 126 gig Ethernet ports, non-blocking. And every one of those ports comes with layer-four to layer-seven intelligence, supported in hardware. Also, the switch comes with up 64 CPUs. The CPUs allow very large carriers to use the switch to perform customer billing and subscriber management.

Light Reading: What about All Optical Inc.?

Lotan: They’re working on next-generation optical components. But they only have seven people right now. They don’t even have a URL yet. It’s basically a bunch of professors in Israel working on optics.

Light Reading: What about New Access?Lotan: Well, New Access is not in access any more. They’re now making a regional metro play. Expect the name to change. [Editor’s note: New Access recently changed its name. See Zaffire Announces First Packet-Enabled DWDM System ] Light Reading: What’s the hottest optical networking stock on NASDAQ today?Lotan: MRV, for sure. It’s still undervalued. Especially when you consider the methodologies people use to estimate the valuation of our competitors. Light Reading: OK, but you would say that, wouldn’t you? What else?

Lotan: Personally, I bought Marconi [MCONY] because we’re one of their suppliers, so I know how aggressively they’re moving. I am sure that people are underestimating them. Ultimately everything will go to fiber, and on its own that makes them a good buy. There’s no downside. There’s only upside. Right now it’s boring but in six months you’ll see it climb, big time.”

Light Reading: Anything else.?

Lotan: Lucent. It’s been punished big time. And if they spin off their optical division it will be worth more than Lucent itself (see Vendors To Spin Off Optical Assets). Light Reading: What does the future hold for Noam Lotan? Lotan: My heart is with MRV. I have been there for ten years. I was employee number eleven.

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