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Enablence CEO Stands by His Plan

Life has gotten more complicated for Enablence Technologies Inc. (Toronto: ENA) in the past two years as the optical components company has acquired suppliers and possible competitors, but the company's chief executive says that's the future of this sector.

Arvind Chhatbar defends the acquisitions of fiber-to-the-home systems companies Pannaway Networks and Wave7 Optics Inc. as representing the vertical integration that a transceiver company like Enablence has to have.

"If we decided to remain a single-product transceiver supplier in the marketplace, our life would be very short," Chhatbar tells Light Reading.

The Canadian company has been trying to build its name on planar lightwave circuits (PLCs), integrated devices that don't require the amount of manual assembly of traditional optical components. Like everyone in the sector, though, Enablence has been having a difficult time of it.

The company acquired suppliers Albis and ANDevices in 2007, but the Pannaway and Wave7 moves were what really caught people's attention. It's reminiscent of the waning days of Corvis, when it acquired customer Broadwing in 2003, letting the original Corvis equipment fade out afterward. (See Corvis & Broadwing: Together At Last and Broadwing to Sell Corvis Business.)

That's not Enablence's plan, Chhatbar says.

The problem, to steal a catchphrase, is that optical companies don't get no respect. Too many companies are selling to what's been a dwindling pool of systems companies, a trend that keeps margins pushed downward. (See Optical Components: Still Too Crowded.) A part that's lower cost, or that emits less heat, doesn't necessarily gain the components company any price premium, Chhatbar says.

"The only way to do this is to be vertically integrated, backwards and forwards. When we do forwards integration, it obviously is associated with customers. How else can I do it?" he says.

By owning systems, Enablence can also get a head start with carriers, "instead of waiting for, say, Verizon Communications Inc. (NYSE: VZ) to issue an RFP that the Alcatels and others try to respond to, and they wait for that to be accepted, and then go to the components level," Chhatbar says. "If we did things like everybody else, we would not have the necessary competitive edge"

In a sense, Enablence's moves are similar to what Infinera Corp. (Nasdaq: INFN) did. Infinera's real product is the indium phosphide (InP) chip that integrates handfuls of optical components. But to make sure the chip got used to its fullest potential, Infinera built the system that goes around the chip. (See Infinera Declares WDM War.)

There's still the fact that Enablence is small and has never been profitable. Enablence finished its third quarter, which ended Jan. 31, with cash and equivalents of CDN$18.6 million (US$16.1 million), compared with CDN$32.2 million (US$27.9 million) three months earlier.

To pick up more cash, the company priced an offer on April 30 to sell 40 million stock shares at CDN$0.30 apiece (26 cents U.S.), which multiplies out to CDN$12 million (US$10.4 million).

Investors recently got a bit of good news when Enablence announced Fujitsu Ltd. (Tokyo: 6702; London: FUJ; OTC: FJTSY) as a customer. (See Fujitsu Selects Enablence.) "It is going to be a series of components that are PLC-based, mostly for the metro and long-haul markets, not fiber to the home," targeting Asian and North American carriers, Chhatbar says.

That would suggest it's a deal for ROADMs components, which one source outside Enablence confirms. That source also pins the value of the deal at less than $3 million; Chhatbar won't disclose any numbers related to the deal.

— Craig Matsumoto, West Coast Editor, Light Reading

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olsen 12/5/2012 | 4:05:15 PM
re: Enablence CEO Stands by His Plan

What a crock of s***.


Arvind collected a buttload of cash from investors back in 2007 (CAD $57 million) and the only "product" he had to sell to investors at the time was the integrated PLC-transceiver based on the modified echelle grating. Marketing that, he got all the money back then. After that he went on a shopping spree, and now the transceiver is no longer mentioned. Go figure. His optical components business, which comprises the original promising transceiver business, and now ANDevices, had a GM of 7% last quarter. Wow. Sounds like fraud to me - since he now has to get more money.


Ask him about that, will you, Craig?

danp5648 12/5/2012 | 4:05:13 PM
re: Enablence CEO Stands by His Plan

The reason the transceiver is no longer mentioned is like he said just did not matter in the end. The idea of phase II is to forget the transceiver business and move the image up the food chain but don't go Corvis i.e too far. Buying a network is like buying a lake for your boat. Cisco is gettng into electronics so if E goes into end products like C I would still be ok with that. Transceivers are so in the past, get over it.   

menexis 12/5/2012 | 4:05:12 PM
re: Enablence CEO Stands by His Plan The Albis and ANDevices acquizations were not the best ones they could have had in 2007
deauxfaux 12/5/2012 | 4:05:12 PM
re: Enablence CEO Stands by His Plan

The Madoff-Jr posts may be more accurate than anyone wants to believe.


Arvind made a big deal out of PLC based di & triplexers and raised all of his money based on THAT value proposition. Once he got the money, he then abandoned components and invested in an equipment company that doesn't even use his product. Then he topped it off with a bunch of device and module-co's that were losers standing alone. Voila....instant vertical integration. Why? They had revenue and his "transceiver biz" didn't have serious revenue then, now or anytime in the future. Now that his equipment business competes with potential equipment OEMs he MUST de-emphasize components because no one that competes with W7-Enablence at the OEM level would ever buy components from Enablence. Lucent, NT and Alcatel figured this out and divested their component businesses.


But this "strategic conflict" problem didn't cost Arvind anything because he never had a component business to begin with!


He is trying to buy revenue with cash that was originally meant to develop this so called revolutionary PLC technology.....it is a shell game with a value proposition that is shuffled more than a vegas card deck.

Madoff_JR 12/5/2012 | 4:05:11 PM
re: Enablence CEO Stands by His Plan

"The Canadian company has been trying to build its name on planar lightwave circuits (PLCs), integrated devices that don't require the amount of manual assembly of traditional optical components. Like everyone in the sector, though, Enablence has been having a difficult time of it."


WHAT?? they claim they have minimal manual assembly?? considering they re-label wooriro splitters, plus if their PLC platform is so optimized where is the stinking profit?? all they do is lose money.


Why are their no upfront unbiased analysts anymore??? it doe not take much to see that their PLC division in fremont is nothing more than a garage shop, period.


One can do a google map of the location and make a pretty good estimate based on whats on the roof to support their wafer facilities and trust me it ain't all that hot.


The only thing investors have and will continue to see is consistent burn rate proportional to what little they produce. this garbage is getting so OLD.. same old stock pumpers trying to pump up the stock. Follow the habitual pattern.


Why has the PLC business group failed to become anything? Answer.. they have no competitive intellectual property rights to what they make. Follow the history, ex piri people.. no IP , nothing original, no next generation platforms.


you go to a dollar store you get what you pay for. you want quality ... you pay for it with the protection that in a decade the lawyers wont be comming knocking on your door like JDS has done over the years, look at JDS wiki and you will see examples such as the metconnex scenario.


who do the big players buy PLC's from??? not the andevices group, why??? quality, IP protection, customer service? go ahead and call their PLC number and see if you can get through anyone or if they understand english very well.


Does anyone really know what it takes to make PLC's? and the issues regarding yield from the wafer to the final article delivery? it must take much more money to produce these in comparison to what they sell them for otherwise with all the high hope hype hoopla we would have seen the profits.


" Chhatbar won't disclose any numbers related to the deal. "


..go ahead disclose them, ....be upfront for a change, if the deal is worth 50 40ch AWG's at $825.00 say it.. don't leave the stock holders thinking it's a million dollar deal to sucker up more investors on your plan to  weaken the portfolio with a second round.


Why is it so difficult to present dollar values to the ZTE, Fujitsu,Delhi,TFN media, Superonda,Osaki,Setar,Dansk press releases.


With All these  deals it looks like Enablence invented a new term for the investors.... "CORPOPRATE GRAFFITI". a bunch of worthless statements.


all these high hope deals WTF... are they simply sending out demo's to these guys & calling that a deal???  give out numbers.


Or are they approaching them like a dog with it's tail under his butt to beg for a few orders then send out the " graffiti press releases" ??

Zu-Ping 12/5/2012 | 4:05:08 PM
re: Enablence CEO Stands by His Plan

Deauxfaux says:


"The Madoff-Jr posts may be more accurate than anyone wants to believe."


I says:


"Hell hath no fury like a former emplyee."


Madoff, have you perhaps worked at Enablence?  I would assume most of what you say is true, but what ever happened to equality?  Equal opportunity hate.  :)


fyi, I used to work on the other side of the motorway.


 


 

menexis 12/5/2012 | 4:05:07 PM
re: Enablence CEO Stands by His Plan And how is this in any way a Scam
Zu-Ping 12/5/2012 | 4:05:02 PM
re: Enablence CEO Stands by His Plan

It seems to me that Enablence is not all that different than many struggling companies. 


1. They are scrambling a bit, to find profibility.


2. They are trying to fluff it up a bit.


3. They are tryng to buy revenue.


3. They are paying someone too much money.


Sounds familiar, does it not?  Who can list another company that meets these criteria?


Cheers :)


 

deauxfaux 12/5/2012 | 4:05:02 PM
re: Enablence CEO Stands by His Plan

How is this a scam?


The shifting value proposition: from components to systems


The only person being enriched is the CEO at C$700,000/yr at last look


The poor chance for success.

danp5648 12/5/2012 | 4:05:01 PM
re: Enablence CEO Stands by His Plan

Yep the stuff ZTE is buying from Enablence!


http://fibresystems.org/cws/ar...


Report names ZTE as fastest growing telecom equipment provider in 2008


http://fibresystems.org/cws/ar...


Yep and the stuff Fujitsu is buying!


Fujitsu selects Enablence to provide PLC-based fibre-optic componentshttp://fibresystems....


Fujitsu #1 metro WDM and ROADM vendor in North America


http://www.fujitsu.com/us/news...


Delhi is buying!


http://fibresystems.org/cws/ar...


Dansk is buying!


http://fibresystems.org/cws/ar...


Setar is buying!


http://fibresystems.org/cws/ar...


BroadLight’s BL2338 and BL2340 is suppling


http://fibresystems.org/cws/ar...


And don't forget this:


"The recently-passed Broadband Stimulus package in the US will make $7.2 billion available to operators delivering broadband to rural or underserved areas to help them expand their networks"

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