Xin Cheng, Founder, Sorrento

"One day the oil will run out, but optical networking will be around for a long time."

July 25, 2000

6 Min Read
Xin Cheng, Founder, Sorrento

The Light Reading Interview

In The Spotlight: Xin Cheng

Photo of Xin Cheng, Founder, SorrentoConsider, if you will, Sorrento Networks Inc. It isn’t your average optical networking startup. For one thing this manufacturer of DWDM equipment for metro networks actually has revenues. For another, United Pan-Europe Communications NV (UPC), Europe’s largest provider of broadband networks, is a majority shareholder in the company. Translation: Sorrento is virtually guaranteed to sell a boatload more of its products in the future (see Sorrento: Hot Product or Hot Air?).

Yet despite all this -- and unlike other optical networking startups like Avici Systems Inc. and Corvis Corp. -- Sorrento isn’t looking to take itself public at the very first opportunity.

You heard right. Sorrento is sitting out the current round of IPO fever, and taking its own sweet time about a public offering.

What’s going on? Sorrento’s eccentric behavior can be traced back to Dr. Xin Cheng, the company's founder, CEO, and chairman. Xin (it’s pronounced “shin”) joined the company after it was spun out of Osicom. Since then, he’s acquired a reputation as a maverick who does things his way.

One thing's certain: he leads his company of 200 people with passion. “Sorrento is my baby. It’s personal,” he says.

In this exclusive interview with Light Reading, Cheng talks about:

· Being different
· A possible IPO
· Life after marketing
· Its all-optical switch
· Whether Cisco will make it
· Optical networking ethics

Light Reading: Xin, we get two kinds of e-mail about your company. About half of the correspondents love it and nag us because we don't write more about you. The other half can’t stand Sorrento –- they say you’re a bunch of nogoodnicks. Why does Sorrento elicit such extremes of emotion?

Xin Cheng: Because we’re unconventional. People like you to behave in a very predictable way. We don’t. That’s even true of our first product. When we first announced it at a trade show in 1997, a bunch of DWDM long-haul players walked around our booth laughing at us. They were sure that DWDM was wrong for the metro market. They said that we were kidding ourselves. Now they deeply regret it.

Light Reading: You should call them up -- give them a hard time.

Xin Cheng: Well, we’re still friends with them. It’s just that now they know that [metro DWDM] is the big thing.

Light Reading: Is it, though? The first metro DWDM products were just long-haul products with short-range lasers. They sucked.

Xin Cheng: That’s why we’re successful, because we were the first company to develop a product that was actually optimized for and designed for the metro market.

Light Reading: What are your revenues?

Xin Cheng: $12 million for the year ending last January. Light Reading: A lot of companies with no revenues at all are trying to have IPOs. Why aren’t you doing that?

Xin Cheng: [Laughs] At the proper time we’ll do something. We’re waiting for a better team. Well, that’s not really true. We aren’t really waiting for anything. We’re not influenced too much by this euphoria about optical networking. The market is fluctuating. We’re stable.

Light Reading: What’s your market share?

Xin Cheng: There’s really no clear definition of how to slice and dice this market. All three of the big market research firms have different definitions. We are one of the front-runners. Obviously, the company that is most active is Nortel, with its Optera line. But the numbers are confusing.

Light Reading: Dell'Oro Group put out a report recently on metro DWDM and didn’t even mention you in its numbers. What happened there?

Xin Cheng: We need to improve our marketing. We have had business in DWDM since 1997. One of the drawbacks of our culture is we focus on delivering practical products and realizing revenue -- to the exclusion of good marketing and promotion. We didn’t even have a marketing department until February this year.

Light Reading: Blimey!

Xin Cheng: I know.

Light Reading: Let’s talk about the competition. What do you think of Nortel’s strategy?

Xin Cheng: We know the Xros product is not ready [see Nortel Buys a Monster Crossconnect]. We don’t know when it will be ready. Xros is all MEMS [micro-electro-mechanical systems], so it represents a deviation from the electrical approach to building switches in favor of building all-optical switches. If they make it work it’s good for us because we are also going for an all-optical approach. They will have laid the marketing groundwork.

Light Reading: You’ve taken some flak from Light Reading for refusing to tell people what technology you will use to build your all-optical switch –- MEMS, bubble jet technology, or whatever [see Agilent Unveils Optical Switching Breakthrough]. Is that because you don’t know yet?

Xin Cheng: No, we have decided. I’m just not going to tell you.

Light Reading: Please?

Xin Cheng: Ok, it’s one of the above.

Light Reading: MEMs or bubble jet?

Xin Cheng: Yes.

Light Reading: What do you think of Cisco ? Do you think they can successfully reposition themselves as a service provider supplier?

Xin Cheng: Yes. They are definitely on the right path. If you use traditional carrier profiles to measure them they have some way to go in transmission level [market share]. But Cisco is an amazing company. I think they have the culture and the power to make it.

Light Reading: Let’s talk about ethics. Where do you stand on the issue of whether startups should give service providers -- their potential customers -- equity?

Xin Cheng: I can’t comment too much, but obviously companies should follow two sets of guidelines. One is the SEC guidelines -– or their international equivalent. Any company has to follow the law. The second is the ethical considerations of the company itself.

Light Reading: So is Sorrento an ethical company?

Xin Cheng: Yes. We will give our customers equity, as a company. For example, UPC is a shareholder. They put 15 or 16 million dollars into Sorrento. But we don’t give individuals [who work for customers] equity, at all.

Light Reading: What did you do before you were at Sorrento?

Xin Cheng: Sorrento is a spinoff of Osicom. Before this I was the president of Osicom.

Light Reading: Are people buying shares of Osicom in order to find a back door into your IPO?

Xin Cheng: I have no idea what their motivation is.

Light Reading: Where were you before Osicom?

Xin Cheng: Before that I was director of advanced technology at a subsidiary of Amoco, developing fiber optic communications equipment. Amoco got out of that business.

Light Reading: They must regret that.

Xin Cheng: You would think so, wouldn’t you? The original theory was that one day the oil will run out, but optical networking will be around for a long time. I think they were right about that one.

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