Covega Closing In on $10M

It's looking like a good time to be into Tunable Lasers, as components firm Covega Corp. is wrapping up a $10 million round of funding amid talk that the market is surging.

Like laser vendor Apogee Photonics Inc. , Covega was created from the merger of two small players: Codeon and Quantum Photonics, back in 2003. (See Codeon, Quantum Form Covega and ASIP, T-Networks Reach Apogee.) The latest funding round comes primarily from prior investors in those two firms: Core Capital Partners , Intersouth Partners , OCG Ventures LLC , and Siemens Venture Capital (SVC) , CEO Joseph Dixon tells Light Reading.

Both born during the optical bubble, Codeon and Quantum Photonics raised more than $100 million combined and picked up another $17 million upon merging.

Covega employs more than 100 and does its own manufacturing in Maryland, but the company has begun to outsource in cases "where we have extremely large volumes," Dixon says.

Covega makes a variety of components related to transceivers and DWDM modules, but its marquee product is a gain block, the main part of a tunable laser. Covega shipped about 15,000 of them last year and expects to ship four to five times that many this year.

Tunable lasers seem to finally be coming into their own, as multiple companies are saying there's a shortage of the parts this year. "For the first time in four-and-a-half years in this industry, I'm capacity limited," Dixon says.

The shortage of tunables was a hot topic at the OFC/NFOEC conference in March, where laser vendor Santur Corp. hinted that it's considering an IPO. More recently, Bookham Inc. (Nasdaq: BKHM; London: BHM) noted the tunables shortage during its earnings call -- a key point, considering the company plays up tunable lasers as a cornerstone of its future. (See OFC: Optics & IPOs and Bookham Trims Again.)

"Last year, there were something like 17,000 or 18,000 widely tunable lasers shipped. This year, we're hearing numbers like 50,000 to 75,000," says Ben Sitler, CEO of Paxera -- a tunable laser startup that's looking to raise a funding round, too. The company also offers silicon optical amplifiers and lithium niobate (LiNbO3) modulators. Customers include Ciena Corp. (NYSE: CIEN) and Siemens AG (NYSE: SI; Frankfurt: SIE).

About two thirds of Covega's revenues come from telecom, but like most other components firms, the company has broadened into some steadier markets -- specifically medical, defense, and scientific instrumentation. (See Valley Wonk: Optical's Options.) The latter "doesn't grow, but it's highly profitable," says Dan Petrescu, Covega's president and chief sales officer.

— Craig Matsumoto, Senior Editor, Light Reading

Vent 12/5/2012 | 3:53:57 AM
re: Covega Closing In on $10M in the end we will have trancievers and that means integrated designs for the moment Bookham
(even though it is only co packaged tunable + MZ
) JDS ex agility ( though I don't know what state this is in commercially)and I believe Syntune
The external cavity boys who use gain chips like
covegas or anritsu's will not survive in the long run. Intel,Pirelli,Paxera and princeton optronics (still in the game ?) and I think due to it's complicated
external optics (i.e yield and cost) even though it is not a external cavity design Santur
will eventually fall or go into specialised market as Iolon have after the take over.Unless they can develop an integrated strategy that includes an eventual Tosa for a transciever
My bet is that eventually any yield penalties that integrated designs suffer at the start will be solved and that they will have an advantge in the long run over the designs requiring more external optics and therefore more alignment operations. Give it a few years though and time for one or two external cavity vendors time to exploit an IPO window and the market buzz on tunables
The Japanese vendors I don't know much about I must admit.

chipthecat 12/5/2012 | 3:53:57 AM
re: Covega Closing In on $10M There are 2 aspects to this.
1. I don't see anyone gearing up to make something they can already buy off the shelf as required. Not many companies would want to acquire a fab-based technology these days? That's not the 21st century way.
2. Tunable lasers have more uses than just transceivers/transponders, or so I'm told!
Thought for the day. ..
Since several tunable laser manufacturers are using Covega for the basic gain chip, a second source may not provide any suppy line protection if a problem were to strike Covega.
Pete Baldwin 12/5/2012 | 3:53:57 AM
re: Covega Closing In on $10M What kind of tunable-laser ecosystem should we expect to see in the long run? Will folks still be selling piece-parts like Covega is, or will the market boil down to vertically integrated transceiver makers?

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