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Fiberxon Adds $20M

Light Reading
News Analysis
Light Reading
7/4/2005

China-based transceiver vendor Fiberxon Inc. raised a third round of funding last week worth $20 million, money that will go toward volume manufacturing as the company attacks the passive optical networking (PON) market.

But the money doesn't mean Fiberxon, which is incorporated in the United States, is deviating from its plan to go public, according to CEO Li Hsu (see Fiberxon Mulls IPO).

The third round was led by new investor Greylock Partners along with prior investor Apax Partners. It follows up Fiberxon's first round led by Jafco Asia, the first time Fiberxon took money from venture capitalists. Most of Fiberxon's early funding came from customer UTStarcom Inc. (Nasdaq: UTSI). (See Fiberxon Secures $20M and Fiberxon Closes $10M Round.)

The company is making its name in the fiber-to-the-wherever (FTTx) market, with design wins coming to fruition -- hence, the funding round, Hsu told Light Reading in an email from China.

"As these design wins go from trial to full deployment, I expect to see another rapid ramp near the end of the year. I need to get ready for it," Hsu writes. "I do not want to worry about cash flow or funding when the orders flood in."

Hsu has structured Fiberxon like a Silicon Valley company, and the firm's business is by no means confined to the China market. "They have Tier 1 customers and are all over the world, not only in China," says Yoram Snir, a partner at Greylock. "Less than 25 percent of Fiberxon's business, I would say, comes from China."

Dozens of optical component and module companies are reportedly at work in China, and some are starting to move toward the U.S. market. Photon Technology Co. Ltd., for example, has teamed up with privately held NeoPhotonics Corp., which recently took a large stake in the Shenzhen-based vendor (see NeoPhotonics Acquires Photon Stake).

That's not to say a torrent of new Fiberxons is ready to tackle the North American optics market, though. "Most would like to scale up in the Chinese market first. It's very tough to scale out of China when you don't have the international experience," Snir says.

Last week's funding doesn't mean Fiberxon is delaying its IPO hopes. But the exact timing "depends on whether the company is ready for IPO and it also depends on whether the capital market is ready for our story," Hsu writes. "Our plan is still to go IPO some time next year assuming the market gets better for our segment."

Fiberxon is anticipating revenues of $60 million for 2005, up from $38 million in 2004. The company claims to have recorded 10 consecutive quarters of profitability.

— Craig Matsumoto, Senior Editor, Light Reading

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