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Optical/IP

Corvis Offers Grooming Tips

Corvis Corp. (Nasdaq: CORV) has let slip some details of its next big development in optical networking – a grooming switch that will compete head to head with the CoreDirector from its archrival, Ciena Corp. (Nasdaq: CIEN).

The new switch has been under development since last summer when Corvis acquired Baylight Networks, a small startup designing optical network access systems and subsystems, says David Smith, vice president of hardware engineering (see Corvis Completes Baylight Acquisition).

The product, which is expected to go into alpha testing by the end of the year, is far enough along that Corvis has now leased an 88,000 square-foot research and development space for it in Columbia, Md.

“The engineers have been sharing space for a long time,” says Smith. “And they’ve been busting for their own space. Now that they’re getting closer to having something, they can’t continue to share a lab anymore.”

Corvis’s new switch extends the company’s existing product range, which embraces all-optical long-haul backbones. “We’re well aware that you can’t just stop at the core,” says Smith. The new switch will have an electrical rather than an optical core and will give service providers a way of feeding traffic on and off their optical backbones at the bandwidths they want -- multiples of STS1 (51.8 Mbit/s) channels.

Ciena was first to market with a switch capable of grooming STS1s in this way. It’s already shipping a version of its CoreDirector with 256x256 ports, each operating at OC48 (2.5 Gbit/s). And it’s announced a 64x64 switch operating at OC192 (10 Gbit/s).

Corvis has made no secret of its intention to develop a similar sort of switch but hasn't divulged details until now. Yesterday, however, Smith let slip some of the product specs. “Our switch is going to big,” he told Light Reading. “I can’t tell you specifics, but let’s just say 'big.' "

He claims the new switch will be able to scale to 512x512 ports. But he cautions that higher port counts may not be what customers need.

“I’m not sure that 512 ports running at OC192 are really necessary,” he says. “Our switch will be able to do that, absolutely. But no one is suggesting today that one feeder point could generate enough traffic to need that kind of capacity. I’m sure it could happen eventually, but things could be very different then.”

Corvis also plans to match Ciena's CoreDirector on granularity. Like CoreDirector, the new Corvis switch will handle STS1 channels, says Smith. Other vendors, such as Sycamore Networks Inc. (Nasdaq: SCMR) and Tellium Inc., have started off with switches handling much fatter OC48 connections, and are now playing catchup with Ciena.

Smith agrees that granularity is an important aspect of any edge switch. “It’s really essential for any edge switch these days,” he says. He also says that Corvis’s version will be able to concatenate STS1s so that a bunch of them can operate as one big pipe.

Of course, it’s one thing to talk about upstaging Ciena’s CoreDirector and it’s another thing to actually do it. Developing ASICs (application-specific integrated circuits) for such big grooming switches is said to push the limits on semiconductor technology. Corvis has got its ASICs back from the foundry but has yet to complete tests to make sure they work as planned.

By the time Corvis ships its switch, the market also could be quite crowded. Semiconductor vendors are developing off-the-shelf ASICs for STS1 grooming switches (see Velio Breaks Grooming Barrier) -- and when these arrive, other system vendors are likely to jump on the bandwagon. The first among them could be Sycamore, which is already talking about a 512x512 switch capable of STS1 grooming. Startup BrightLink Networks Inc. has plans for an even bigger grooming switch based on a novel distributed architecture (see Brightlink Works on Its Grooming).

Financial analysts question whether Corvis has got deep enough pockets to see all of its product plans through to fruition. With over 1400 employees, five facilities, and two year’s worth of inventory the company may have a tough time keeping up if the current sluggish market conditions continue, they say.

In the quarter ending in September 2000 Corvis raised $1.1 billion in financing, but burned about $185 million. Figures aren’t yet available for the following quarter.

“Two hundred million is clearly a lot of money,” says Max Schuetz, an analyst with Thomas Weisel Partners. “You look around and everyone else is laying people off, and Corvis hasn’t made a big effort to cut costs. Either they have some big contracts that are imminent, or they are a bit more optimistic than we are about the length of this downturn.”

-- Marguerite Reardon, Senior Editor, Light Reading http://www.lightreading.com

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optical_guy 12/4/2012 | 8:34:19 PM
re: Corvis Offers Grooming Tips I would say that this almost a completely different article than the aborting posting of last Sunday. Heck of an edit job, eh?

I almost hate to get into the LR good or bad groove again, but what the hell. I thought it was a pretty good and balanced article.

With respect to whether they will have lots of competition by the time that they roll out their switch, I think that LR misses the point. Sure Corv wants to sell grooming switches, but the advantage to them is not necessarily to compete head to head on a point product but to provide a missing element of their network architecture. Take BWR for example, with the roll out of the corvis transmission, OS, and OADMs, would Ciena really be able to sell their O-E-O switch into the network if Corv had a similar product...one that integrates with the overall network management system, and perhaps provides some degree of commonality in philosophy of operations, maintenance, training, etc.

For their architecture to really work, a high resolution edge switch for grooming at add/drop sites is a necessary element of the product line. I have confidence in their development acumen (vis a vis mention of ASIC development)...after all, many also boo hoo'd their abilty to roll out the core system elements that they obviously have.

The point about cash flow and burn rate is well taken and should be considered. If I remember correctly, Corv is estimating -.7/share earnings for the quarter with 330M shares or so outstanding.....equals a about -2.3 million cash flow for the quarter. 900M go a long way at that burn rate. Of course, the point is well taken that to maintain and better that earnings, while continuing aggessive product development, will take the oft mentioned, but hither to now, unseen new customers. In my opinion this remains the only valid critism of the company, but it is an important critism which they must silence immediately by signing new accounts.

Cio'

O.G.
Fred Snarff 12/4/2012 | 8:34:19 PM
re: Corvis Offers Grooming Tips alpha by the end of the year? good luck. even if Corvis is still around by the end of the year, they will have totally missed it by then.

CIENA owns this market. CIENA is eating Dr. Huber's lunch. this announcement is damage control.

Fred
optical_guy 12/4/2012 | 8:34:18 PM
re: Corvis Offers Grooming Tips I would say that this almost a completely different article than the aborting posting of last Sunday. Heck of an edit job, eh?

I almost hate to get into the LR good or bad groove again, but what the hell. I thought it was a pretty good and balanced article.

With respect to whether they will have lots of competition by the time that they roll out their switch, I think that LR misses the point. Sure Corv wants to sell grooming switches, but the advantage to them is not necessarily to compete head to head on a point product but to provide a missing element of their network architecture. Take BWR for example, with the roll out of the corvis transmission, OS, and OADMs, would Ciena really be able to sell their O-E-O switch into the network if Corv had a similar product...one that integrates with the overall network management system, and perhaps provides some degree of commonality in philosophy of operations, maintenance, training, etc.

For their architecture to really work, a high resolution edge switch for grooming at add/drop sites is a necessary element of the product line. I have confidence in their development acumen (vis a vis mention of ASIC development)...after all, many also boo hoo'd their abilty to roll out the core system elements that they obviously have.

The point about cash flow and burn rate is well taken and should be considered. If I remember correctly, Corv is estimating -.7/share earnings for the quarter with 330M shares or so outstanding.....equals a about -2.3 million cash flow for the quarter. 900M go a long way at that burn rate. Of course, the point is well taken that to maintain and better that earnings, while continuing aggessive product development, will take the oft mentioned, but hither to now, unseen new customers. In my opinion this remains the only valid critism of the company, but it is an important critism which they must silence immediately by signing new accounts.

Cio'

O.G.
boson 12/4/2012 | 8:34:18 PM
re: Corvis Offers Grooming Tips Could you kindly elaborate on the estimates of cash flow, earnings, and burn rate on CORV?

Thankyou.
Me 12/4/2012 | 8:34:18 PM
re: Corvis Offers Grooming Tips Is Corvis looking at this as a core or metro play??

From a previous post:

"The point about cash flow and burn rate is well taken and should be considered. If I remember correctly, Corv is estimating -.7/share earnings for the quarter with 330M shares or so outstanding.....equals a about -2.3 million cash flow for the quarter. 900M go a long way at that burn rate."

Capex spending is chunked out quickly but amortized over a longer period. Their small loss may not reflect actual cash expenditures.
optfresher 12/4/2012 | 8:34:17 PM
re: Corvis Offers Grooming Tips It will be a big one !
but we are looking forward to someone report it1
Peter Heywood 12/4/2012 | 8:34:16 PM
re: Corvis Offers Grooming Tips The link between last Sunday's aborted article and this one is the 88,000 sq ft of space leased by Corvis. Our first reading was that Corvis was expanding manufacturing. It wasn't. The space was for its grooming switch developments - which led us on to this story.

Optical_Guy, I agree that Corvis will have an inside track when it comes to selling its grooming switch to carriers that have already got its all-optical backbone products. But right now, there aren't a lot of carriers in that position, are there?

Applying the same argument to Ciena, you could say that it will have inside track selling its planned all-optical core switch to customers that already have its grooming switches. There's quite a lot of those guys already.

Corvis and Ciena are both aiming to have a full range of products. They're just getting there from different directions.
optical_guy 12/4/2012 | 8:34:16 PM
re: Corvis Offers Grooming Tips The switch talked about is an adjuct to their optical core product line. I don't believe that they are in the metro space at all.

Thanks for insights on accounting practices. With I little more thought on my part I should have forseen this point. You are, of course, right (I think...any accountants out there?)
corefun 12/4/2012 | 8:34:15 PM
re: Corvis Offers Grooming Tips What happens to likes of Tellium with Ciena eating the market and Sycamore dropping bombs
lu-alum 12/4/2012 | 8:34:15 PM
re: Corvis Offers Grooming Tips Hmmmmm product "announcement" 8 months BEFORE alpha. I'm not one of them big city pro-duct marketing guys, but I did stay in a Holiday in Express last night and it seems to me like that kind of a strategy is geared to freeze the market until they can get something cobbled together. Who do they think they are? Cisco?!

Oh yea, I got a grooming switch too! ;-)
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