100G Ethernet

Santur Reaches for 100-Gig

Optical components vendor Santur Corp. has picked up another $13 million in funding to expand its reach beyond tunable lasers and into the 100-Gbit/s market.

In that sense, the funding, announced today, could be a major turning point in Santur's history. "In 2011, it's quite likely 100-Gbit/s will overtake the tunable lasers in terms of proportion of the business," CEO Paul Meissner tells Light Reading.

The money -- being applied to the development of 100-Gbit/s products -- is coming from Santur's previous investors: Menlo Ventures , Sequoia Capital , and VantagePoint Venture Partners . Santur has now raised at least $108 million over the course of eight years, although that includes bubble-era money that's certainly been washed out by now. (See Santur Lands $13M.)

Santur last raised money in 2007, a $26.5 million fourth round that was supposedly going to be enough to take the company public. (See Santur Raises $26.5M, Talks IPO.) This time, the goal is more modest: Santur wants this money to last until the company is back to cashflow breakeven. (Santur had reported being breakeven in 2007.)

"Our forecasts are that by the end of next year, we should be there. We don't know if it will be in Q3 or Q4," Meissner says.

He adds that Santur's cash burn is "well under" $2 million per quarter, meaning the new funding won't be dried up as Santur approaches the end of 2010.

For most of this year, sources around the industry have perceived Santur to be in trouble. The company laid off about half its staff in the spring, and even before then, there were questions about how its tunable laser franchise was standing up to new competition from Bookham -- now Oclaro Inc. (Nasdaq: OCLR) -- and JDSU (Nasdaq: JDSU; Toronto: JDU). (See OMG! Bookham Is Profitable!, Ciena Tunes In Bookham, Doink! JDSU Hits Capacity Ceiling, and JDSU, Emcore Shrink Tunables.)

Business did drop off due to the recession, and that's one reason why headcount is at 150 now, versus 290 in late summer 2008, Meissner says. But he says most of the cuts had to do with Santur transferring some functions to offshore contract manufacturers.

The company still runs a fab in Fremont, Calif., where it's still making its lasers with integrated Mach-Zender modulators. It's also using the fab for building any future products -- such as its 100-Gbit/s devices.

The next franchise
Santur is one of the few companies offering 100-Gbit/s optical modules in the CFP format. Opnext Inc. (Nasdaq: OPXT) has also begun sampling CFPs. (See Opnext Tackles 100G and Group forms 40G/100G MSA.)

Santur started out by developing a 100-Gbit/s laser assembly, consisting of 10 or 12 lasers and an arrayed waveguide used as a multiplexer. It's a derivative of the company's tunable laser technology, which uses a 10-laser array and a micro-electro-mechanical systems (MEMS) device that selects one of the 10 for transmission. (See Santur Girds for Battle.)

But because the CFP is so new, Santur has been making full modules, too -- the PD100-TX and PD120-TX being the 10- and 12-laser versions, respectively -- counting test-and-measurement companies among its first customers. EXFO (Nasdaq: EXFO; Toronto: EXF) announced it's using Santur's module. (See EXFO Unveils 100GigE Tester.) Meissner says Ixia (Nasdaq: XXIA) likewise used Santur for an Interop demo in May.

This isn't necessarily a permanent move. Although Meissner won't commit verbally to a specific plan, he says Santur would be OK going back to selling just devices, or it could go on making full modules, depending on how the 100-Gbit/s market develops. "I'm not attempting, as a conscious strategy, the 'move up the food chain' thing," he says.

Competitors such as Opnext claim Santur's module isn't quite standards-compliant, but Meissner claims the parallel-array approach makes for easier integration, which is partly why Santur could get to market early.

The 100-Gbit/s market is going to take years to solidify, but once it does, Meissner envisions a franchise of devices including multiple 100-Gbit/s products and devices built for longer reaches. (It's the very short reaches -- box-to-box connections -- where 100-Gbit/s is in demand right now.)

Santur did have a top spot in tunable lasers early on, but it's been losing share, according to Ovum RHK Inc. JDSU and Bookham/Oclaro have been counting tunable lasers as a major growth sector. Other competitors in tunable lasers include CyOptics Inc. , Emcore Corp. (Nasdaq: EMKR), Eudyna Devices Inc. , and Ignis ASA . (See Bookham, Avanex Form Oclaro, ExceLight & Eudyna Combine , and Ignis to Acquire Syntune.)

Note that three of those six names have changed in less than a year (Ignis bought Syntune, and Eudyna is getting folded into a Sumitomo Electric Industries Ltd. unit). That points to another difficulty Santur faces: The optical components industry is coming off a small wave of mergers, as mid-sized players start looking for the product breadth they think they'll need to survive. The four major players emerging from this phase are Finisar Corp. (Nasdaq: FNSR), JDSU, Oclaro, and Opnext.

Meissner contends Santur can stand its ground. Being smaller "doesn't hamper us today, because most of our customers view us as a strategic supplier. As soon as we're out competing on cost, on a commodity basis head-to-head, then that's a problem."

— Craig Matsumoto, West Coast Editor, Light Reading

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Vent 12/5/2012 | 3:59:49 PM
re: Santur Reaches for 100-Gig Santur in long term with the technology they have was always going to have trouble once the tunable laser started to integrate modulator XFP etc. It will have niche markets for higher power but this is a sensibile move if the can change the focus and the investors can then recoup a small % of the money they've burnt so far. Like all the bubble start ups they old money must be seen as being written off it if the new 13million can produce a return thats the question
Pete Baldwin 12/5/2012 | 3:59:47 PM
re: Santur Reaches for 100-Gig

Anyone see any chances for Santur to get acquired in the next couple of years?  Finisar and Opnext might each need tunables...

Vent 12/5/2012 | 3:59:43 PM
re: Santur Reaches for 100-Gig Craig
Finisar or Opnext might be interested if the santur technology could be squeezed into an XFP If they can there even better engineers than eanybody thinks. Check out the technology before looking for M&A
voiceunderip 12/5/2012 | 3:59:40 PM
re: Santur Reaches for 100-Gig

I think the new (old) investors are betting on just that (an acquisition), although I doubt the tunable part of the biz will be very attractive.  Might have been better to just take the new money and start over as a 100G company - the tunable customers wouldn't have been happy, but is anyone really happy with their tunable laser supplier anyway?


^Eagle^ 12/5/2012 | 3:59:38 PM
re: Santur Reaches for 100-Gig


Your point that Opnext or Finisar might need Santur or a tunable is a good one at the high level.

However, it is widely known in silicon valley that both Opnext and Finisar looked at buying Santur in the last several months and found the asking price way too high, especially considering Santur's dwindling revenues, Santur's loss of market share, and rapidly shrinking or disappearing margins.

Both walked away.  

Do you have any new news that either of these players are going to make any serious run at Santur??

Given the settlement of IP issues between Bookham and JDSU (Agility) and the price that was reached for that settlement, the price for tunable IP has been set a bit lower than the price Santur would like. 

In my view, this 13M investment is analogous to the proverbial "hail mary" pass..... sometimes works, but most of the time is a symptom of a former hero trying for one last "miracle" play.  We all know how often that pays off.

What is Santur going to do about their cost profile? cost of the product, cost of the overhead, cost of the burn rate, cost of too many high salaried managers....for a company of it's size, the management team is too large, and too highly paid IMHO.

Does anyone know what their burn rate REALLY is?  How long will this 13m last them?  How much of the 13M did they really get in new money and how much was burned right away to service the debt?  How much unfunded or under funded obligations are they carrying?  In other words, how much of the $$ will the investors require that they keep in reserve to service debts and liabilities should they shut down?

In other words, how much help is this really for Santur and how long does it realistically carry them?


^Eagle^ 12/5/2012 | 3:59:37 PM
re: Santur Reaches for 100-Gig

Vent, I think your comment "check out the technology" is right on track.

Santur has a very complex design that is not easy to package, requires 2 TEC's with separate control loops, and they have NOT been able to get a good packaging design to co-package their new 10G MZI with the tunable and get it qualified.... several other issues as well.

Almost no chance to get it into an XFP as your post indicates that you clearly understand....


^Eagle^ 12/5/2012 | 3:59:37 PM
re: Santur Reaches for 100-Gig

No one is going to offer Santur much, if anything, over the amount of cash Santur just raised.  best guess for an acquisition range: 10-20M (20M being wildly optimistic based on the news that is circulating underground in the industry about the company and it's technology).  In my view the 13M investors are hoping to find a buyer to cover the 13M investment and any unfunded liabilities the company has.  The 13M was to buy time so that the investors did not have to loose even more money winding down and shutting the company....

Santur investors have the "hope" that the same management team that bled out the cash doing their former "strategy" can do a better job with this "new" strategy.  Unless executives are replaced and new blood brought in, how can we expect this "new plan" to do any better than the old??


^Eagle^ 12/5/2012 | 3:59:37 PM
re: Santur Reaches for 100-Gig


One small correction: Santur does NOT have an integrated Mach Zehnder modulator. It is a separate chip that is co-packaged.  it is not integrated.

Same approach that Bookham (Oclaro) uses.


Steve0616 12/5/2012 | 3:59:36 PM
re: Santur Reaches for 100-Gig

If Avago completes its planned IPO next month as planned, (seeking $540M), I reckon they will do some major shopping within the year. Another why now? question.

voiceunderip 12/5/2012 | 3:59:35 PM
re: Santur Reaches for 100-Gig


Agree with most of what you say, but doesn't sound like you put much weight in their 100G efforts. I've heard they might actually have something there - what do you think?

- vuip


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