Competition Kills Metconnex
Both companies play in the reconfigurable optical add/drop multiplexer (ROADM) market -- but that market is small enough that the loss of one big contract can be devastating.
That's apparently what happened to Metconnex. The startup reportedly scored Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA) as a customer for its wavelength selective switch (WSS), the central component of a ROADM. Tellabs, in turn, had won a ROADM contract with Verizon Communications Inc. (NYSE: VZ). (See Tellabs Victorious at Verizon.)
But in the wake of Metconnex's apparent demise, CoAdna chairman and CEO Jim Yuan is casually noting that his company's WSSs are being used at Verizon. While CoAdna isn't naming its equipment-vendor customer, it seems unlikely that it would be anybody but Tellabs.
"A Tellabs deal would be very lucrative," says Scott Clavenna, chief analyst for Heavy Reading. "It would give you direct access to one of the two big ROADM contracts out there," the other one being AT&T Inc. (NYSE: T).
Yuan admits his company displaced a competitor for the Verizon deal, and he believes the difference was Telcordia qualification: CoAdna had it by May of this year, and the competitor didn't. "That triggered the whole chain reaction," Yuan says.
Metconnex also was sued by JDSU (Nasdaq: JDSU; Toronto: JDU) last year, although it's unclear whether that case contributed to the decision to shutter the startup. (See Metconnex Denies Claims and ROADM Show: Funding & Feuding.)
Calls to Metconnex and its investors went unreturned.
The ROADM concept has been around for years but is only beginning to take off, driven in part by the compactness and flexibility of WSSs. (See Next-Gen ROADMs.) But the market remains limited. Yuan notes that sales, even with Verizon getting aggressive, are ramping to just more than 100 units per month -- not exactly enough for CoAdna to be rolling in cash. "We know the market's not big, so we can't spend much money," he says.
In addition to CoAdna, JDSU, and Metconnex, startup Capella Photonics Inc. is offering WSSs.
Yuan founded CoAdna in 2000 after leaving the optical components division of Royal Philips Electronics NV (NYSE: PHG; Amsterdam: PHI). In an interesting twist of fate, CoAdna recently moved its Sunnyvale, Calif., headquarters to a site just blocks from Yuan's old Philips office.
CoAdna has taken on a few different personae since the bubble burst. The company dabbled in variable optical attenuators for the amplifier market, and in devices for 40-Gbit/s polarization mode dispersion compensation. But its original goal had been in ROADMs -- the company's name stands for Configurable Optical Add Drop 'N' Attenuation.
Metconnex never got very big; at last report, it employed 30. The company had raised $21 million in three rounds, the latest coming early this year. (See Metconnex Raises $8.1M.)
Metconnex isn't alone in abandoning the ROADM market. A glance at the Website of Polychromix Inc., which demonstrated a WSS in early 2005, shows lots about the spectrometer market but little about ROADMs.
— Craig Matsumoto, Senior Editor, Light Reading