Optical/IP Networks

Arroyo, Lightcross Join Forces

Components startups Arroyo Optics, and Lightcross Inc. announced late yesterday that they plan to merge, in a move aimed at improving their chances of survival in a market that takes no prisoners (see Arroyo, Lightcross to Merge).

The surviving entity will be called Arroyo Optics, and will comprise 45–50 people.

The product platforms sound pretty different: Arroyo makes liquid-crystal based products such as tunable filters, while Lightcross is a developer of silicon-based passive components including Arrayed Waveguide Gratings (AWGs). So what do they have in common?

Two investors for a start: ComVentures and Arch Venture Partners. That helped move the deal along, according to Hatch Graham, interim CEO at Arroyo. In addition, both products involve software-based tuning, which Graham sees as a major upcoming trend, as it improves the speed that devices can be reconfigured. "That's where the future is: software provisioning," he says. "Both of these technologies are leaning towards where the industry's going."

Since Hatch Graham is only interim CEO, the deal gives Arroyo a "real" CEO in the shape of Bob Barron, a minor optical celebrity famous for selling startup Chromatis to Lucent Technologies Inc. (NYSE: LU) for $4.5 billion in 2000 (see Lucent Catches Chromatis)

Financial details of the transaction were not disclosed. However, Arroyo is bullish about its chances of getting VC money in the future. "We will raise additional dollars in the next few months, money that is already reserved for us, providing we meet certain milestones," claims Arroyo's VP of marketing Clarel Thevenot.

It's worth pointing out that Arroyo went nine years without generating any revenues. Founded in 1991, it worked on a string of products, including a liquid-crystal wavelength blocker, never quite getting to the stage of shipping to customers.

The wavelength blocker nearly didn't see the light of day either. When Corning Inc. (NYSE: GLW) released a similar product first, Arroyo retreated and regrouped, according to Thevenot. Following Corning's decision to can its own wavelength blocker earlier this year, Arroyo eventually came out with a second-generation part just last month (see Corning Chops Wavelength Blocker and Arroyo Debuts Wavelength Blocker). Perhaps as a result of Corning's decision, Arroyo now claims to have customers for its product, but isn't at liberty to name them at present.

Founded in 2000, Lightcross has a shorter history, and it too recently released its first product (see Lightcross Debuts VOA Arrays).

— Pauline Rigby and Craig Matsumoto, Senior Editors, Light Reading

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Dr. Darklight 12/4/2012 | 11:21:51 PM
re: Arroyo, Lightcross Join Forces Not sure how this works. Take two companies which have burned through lots of cash, multiple restarts with little technical progress and put them together. Is this what the investment analysts mean by synergy?

telelight 12/4/2012 | 11:21:49 PM
re: Arroyo, Lightcross Join Forces At least showed that both companies had not be closed. We hope VCs pockets are deep enough.

Lichtverbindung 12/4/2012 | 11:21:48 PM
re: Arroyo, Lightcross Join Forces - failed at building a product at Chromatis, sold it for $3B
- burned $60M at Lightcross with nothing to show for it, convinced investors to give him the CEO job at Arroyo
- will layoff Arroyo engineers and sell non-functioning VOA arrays with tuning software to Bookham for $50M
douggreen 12/4/2012 | 11:21:47 PM
re: Arroyo, Lightcross Join Forces I think the ideas is that you can support both product lines with a common overhead structure(finance, manufacturing, marketing, etc.) If you have two companies, both of which you think have products that have a chance of succeeding, but cannot afford to finance both, this is a viable alternative.

Obviously at least one of the products needs to be succesful for the strategy to work. Much of it is dependent on an overall recovery in the optical networking market.

Lichtverbindung 12/4/2012 | 11:21:46 PM
re: Arroyo, Lightcross Join Forces The Lightcross product never worked and Arroyo's track record is far from being brilliant (nine years and still no product).

I think the concept here is more to save face and start fresh with the best engineers from both companies, they just kept the wrong CEO...
BobbyMax 12/4/2012 | 11:21:45 PM
re: Arroyo, Lightcross Join Forces This merger is indeed very strange. What do eah of these companies achieve? Nothing. Who is the loser and who is the winner? Both are losers. Bob Barron deserves a lot of credit for selling Chromatis, a piece of junk, to Lucent. Who will be the next victim?
mrlambdaman 12/4/2012 | 11:21:37 PM
re: Arroyo, Lightcross Join Forces if it took them 9 years to develop, how good of a product do they have? I haven't had a chance to test their DCE device, but the performance claims seem to be in line with nearly every other company offering this product, except maybe a lower IL. Has anyone played with their device? I still think that LC still have some long-term reliabilty concerns so I'm a little aprehensive about them. Comments?
realoptics 12/4/2012 | 11:21:36 PM
re: Arroyo, Lightcross Join Forces One stone is not able to float, neither is two put together.
telelight 12/4/2012 | 11:21:34 PM
re: Arroyo, Lightcross Join Forces Someone could not get a Harvard MBA but he definitely can create cases in the textbooks of Harvard Business School.
istouk 12/4/2012 | 11:21:32 PM
re: Arroyo, Lightcross Join Forces Sorry to say that, but as far as I know all the three statments are lies.
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