Optical components

CyOptics Chasing Slower Widgets

Former 40-Gbit/s hopeful CyOptics Inc. is still kicking, having picked up another $10 million this week to pursue -- you guessed it -- slower components.

The funding brings CyOptics' total up to $87 million in four rounds. One new investor, external to the company, participated but is not being revealed. The rest of the money came from prior investors: EuroFund Partners, Innovacom, Soros Private Equity Partners, Sprout Group, Ventech, and lead investor Jerusalem Venture Partners (see CyOptics Raises $10M).

CyOptics was founded in 1999 to take on the then promising 40-Gbit/s market with indium phosphide (InP) based active components. In fact, it was one of the first components startups highlighted in Light Reading (see CyOptics Targets 40 Gbit/s DWDM Components).

The company stayed alive by downshifting into 10- and 2.5-Gbit/s components. Its forte nowadays is building transmit-and-receive optical subassemblies (TOSA/ROSA) for transponders. Its focus remains on long-reach transponders for the telecom market, as opposed to enterprise modules; one example would be its engines for 10-Gbit/s XFP modules, which target 1550nm transponders with 40- or 80-km reach.

CyOptics still has 40-Gbit/s parts, but they're moving mostly in sample quantities, and mostly for academic and research purposes. "There is activity in the 40-Gbit/s market, but it's not robust," says Ed Coringrato, VP of business development.

But by moving into less rarified territory, CyOptics faces more competition. In fact, some would argue the TOSA/ROSA market is overcrowded, with competitors including Avanex Corp. (Nasdaq: AVNX), Hymite A/S, JDS Uniphase Corp. (Nasdaq: JDSU; Toronto: JDU), Mitsubishi Electric & Electronics USA Inc., NEC Corp. (Nasdaq: NIPNY; Tokyo: 6701), Oki Electric Industry Co. Ltd., Sumitomo Electric Industries Ltd., and TriQuint Semiconductor Inc. (Nasdaq: TQNT), to name just a few.

The key to survival for these companies lies in generating cash. For many, that means increasing capacity utilization. Companies such as CyOptics that own their own manufacturing aren't using it to the fullest, because demand isn't there. "We just hear over and over that everybody's running at such low capacity. They have to find a way to get something running through those factories," says analyst Tom Hausken of Strategies Unlimited.

Beyond that, the whole module market is crowded, with a bevy of vendors building to multiservice agreements (MSAs) such as the Xenpak and XFP formats for 10-Gbit/s modules. In turn, chip and components suppliers are rushing to prove their wares can make those modules smaller and less power hungry (see Squeezing Money From Modules).

CyOptics hopes to gain an advantage through integration. The company makes its own InP lasers, modulators, and photodetectors and aims to combine them into more compact forms than seen in competing products.

To round out its in-house manufacturing, CyOptics scooped up former high flier Cenix Inc. last year and eventually shifted headquarters to Cenix's Lehigh Valley, Pa., location, from Massachusetts. The company employs about 60 (see CyOptics Snaps Up Cenix Shards and CyOptics Relocates HQ).

— Craig Matsumoto, Senior Editor, Light Reading

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