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Infineon: 'Just One Word... Plastics!'

Infineon Technologies AG (NYSE/Frankfurt: IFX) could be quitting the telecom optics game and shutting down the products that it couldn't sell off to Finisar Corp. (Nasdaq: FNSR). It's one of three options the company says it will explore to fix its money-losing division.

If it did indeed shut down the telecom optics unit, all that would remain of Infineon's optics group would be the plastic optical fiber business, which primarily serves the automotive market.

At a press briefing in Munich on March 2, Infineon reportedly said it would "turn around, sell, or close" the telecom optics group. A spokesperson confirms the reports.

"Infineon is looking into alternatives for the continuance of its optical products businesses, including a restructuring or the possible sale of its bi-directional transceiver [used in FTTH buildouts] and Paroli [parallel optics] product lines," an Infineon spokesman says. "The plastic optical fiber unit is integrated into the company's automotive product lines."

However, last week at the OFC/NFOEC tradeshow, customers reportedly received notice that they had only six months left to order those products, according to Dave Buse, senior vice president of marketing for Finisar's optical products division.

"By the end of the calendar year, that stuff is going to be gone," Buse says. Infineon had spun out the optical group a year ago in hopes of finding a buyer (see Infineon Spins Out Opto Group).

Word of the company's departure from telecom optics was flying around OFC/NFOEC. One competitor, requesting anonymity, said Infineon customers at the show were scouting around for a replacement source.

Last year, Infineon struck a $232 million deal to sell the optics division to Finisar. But as time wore on, Finisar began reconsidering. After plenty of drama, including a cancellation, Finisar bought just the transceiver assets, without people or facilities, for $48 million (see Finisar Buys Infineon Optics, Finisar, Infineon Modify Terms, Infineon Calls Off $206M Sale, and Finisar Buys a Bit of Infineon).

It was the obligatory SEC delay that did the deal in, Buse says, because it gave Finisar the time to reconsider. "We didn't really welcome that delay, but it really helped us," Buse says. "The things that were of the most value were the things we got."

Finisar picked up 10-Gbit/s modules to fit the specifications of the Xenpak and X2 multiservice agreements (MSA). Finisar had chosen to skip those generations of parts, instead targeting the XFP MSA that's expected to dominate future generations of 10-Gbit/s Ethernet optics.

It now appears those generations won't arrive until "2006 or 2007," Buse says. In the meantime, customers -- most notably Cisco Systems Inc. (Nasdaq: CSCO) -- are using Xenpak and preparing for X2, giving Finisar plenty of motivation to pursue those products. "We don't want to miss that growth," Buse says.

— Craig Matsumoto, Senior Editor, Light Reading

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