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Chorum Seals Deal With Nortel

Light Reading
News Analysis
Light Reading
2/23/2001

RICHARDSON, Texas -- On Monday, Chorum Technologies Inc. will announce that it has signed an agreement to supply Nortel Networks Corp. (NYSE/Toronto: NT) with its PolarWave Optical Slicer filters. Nortel won’t let Chorum say what the details of the deal are -- only that it’s a multiyear agreement worth millions of dollars.

Nortel uses Chorum’s filters in its Optera long-haul DWDM systems. The Optical Slicer, a passive device, combines several thousand channels onto a single fiber strand (see Chorum to Ship New DWDM Gizmos). Once those wavelengths have traversed the network, slicers on the other end separate those channels back off the fiber strand. The upshot is the network can carry more bandwidth.

Chorum’s agreement with Nortel reflects what’s been happening between the two companies since early last year. Chorum, which is in registration for an IPO, recognized revenues of $6.1 million for the three months ending December 31, 2000, and all of that revenue came from its shipments of Optical Slicer filters to Nortel Networks, according to the most recent filing with the Securities and Exchange Commission. In the prior quarter, Chorum recognized $3 million in revenues from the same business.

"Recognized” is the key word here. Chorum is shipping Slicers to (and getting paid by) at least three customers right now, according to CEO Scott Grout. But the company is conservative about how and when it accounts for revenues. It tends to wait about three months, according to Grout.

So who are Chorum’s other customers? Grout’s lips are sealed for now, but we do know that Chorum has shipped products to Alcatel SA (NYSE: ALA; Paris: CGEP:PA), Corvis Corp. (Nasdaq: CORV), Fujitsu Network Communications Inc., Lucent Technologies Inc. (NYSE: LU), Marconi Communications PLC (Nasdaq/London: MONI), Cisco Systems Inc. (Nasdaq: CSCO), Sycamore Networks Inc. (Nasdaq: SCMR), and TyCom Ltd. (NYSE: TCM; BSX: TCM), according to public filings.

Chorum's competitors include Corning Inc. (NYSE: GLW), Avanex Corp. (Nasdaq: AVNX), and JDS Uniphase Inc. (Nasdaq: JDSU; Toronto: JDU).

For his part, Grout remains bullish about the long-haul space, despite Nortel’s recent trouble with the economic slowdown: "What happened to companies in the most recent quarter is not meaningful relative to all the bandwidth that’s going to be deployed in the next several years."

-- Phil Harvey, senior editor, Light Reading http://www.lightreading.com

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rredfield
rredfield
12/4/2012 | 8:51:15 PM
re: Chorum Seals Deal With Nortel
How do you think this deal affects Avanex. Do you think Chorum will cause a slowing of AVNX growth rate. Is NT just cross vendorizing ?

tia

ron
captain kennedy
captain kennedy
12/4/2012 | 8:51:10 PM
re: Chorum Seals Deal With Nortel
Do we need another billion dollar one-trick pony?
OpticalValueLine
OpticalValueLine
12/4/2012 | 8:51:04 PM
re: Chorum Seals Deal With Nortel
With the total passive component market keeps slow growth, many many such companies are crowding into the same tunnel, each of them expands like a hell. They are just killing each other. We see the price war ahead. It is easily predicted that all the stock prices will keep going down, down..., until there is no profit in this industry. Pretty sad, isn't it?
^Eagle^
^Eagle^
12/4/2012 | 8:50:57 PM
re: Chorum Seals Deal With Nortel
Chorum's announcement does not mean that Nortel is adding additional vendors. In reality, Chorum has always been the prime supplier to this application at Nortel with Avanex being the second source. Chorum has been on this contract since the beginning and ships approximately 70% of the supply Nortel uses on this application.

Avanex is the follower here not the leader.

sailboat
pingu
pingu
12/4/2012 | 8:50:56 PM
re: Chorum Seals Deal With Nortel
Hi sailboat,

Chorum looks like it will be a great company. The Gilder Technology Report recently added Chorum to its "Telecosm List" for its Avanex-like qualities. I hadn't heard that 70%-30% Chorum-Avanex split before for Nortel sales. My info shows Nortel bought at least $4.8 million of PowerMux from in the last quarter (end-Dec) and $6 million of Chorum's product in its most recent quarter (I'm not sure which quarter was most recent for Chorum, though). What are your expectations for sales growth of these DWDM systems by Nortel over the next year or two?

I would be interested to learn your thoughts on how Chorum's tech compares with that of Avanex. In your view, what makes Chorum the leader here and Avanex the follower? Would you consider Chorum to have good long-term prospects? A promising IPO for troubled times?

Perhaps you didn't see it, but I posted some questions to you on the Avanex board in response to a post of yours there. I enclose them below. I would appreciate any light you can shed on both sets of questions.

Thanks and Regards,
pingu

-----------------------------
Hi sailboat,

That is interesting, but for me unverifiable, information. I'll take it under advisement all the same. Since you think I'm lacking in some ("insider") information (apparently a pre-requisite for investing nowadays?), perhaps you can flesh out the "real story" a bit more by answering these questions:

To what does your source attribute the high level of returns in this particular contract? Do they believe it reflects the newness of Avanex's products, the rapid ramp-up in Avanex's production recently, or because their is some fundamental problem at Avanex? Which of Avanex's products does your source buy? Does your source expect to demand less of Avanex's products as a result? How much less? How much (in $ terms) of Avanex product does your source expect to buy in 2001? How about 2002? And which products? (PowerMux NxG, PowerShaper, etc.)

Lastly, would you consider AVNX to be a poor/good/excellent investment? Why or why not?

Thanks and Regards,
pingu
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