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From Graphics to Optics

Light Reading
News Analysis
Light Reading
6/18/2001

Creo Products (Nasdaq: CREO; Toronto: CRE), a publicly traded company that makes laser imaging systems for the graphic arts industry, is shifting its focus and getting into the optical components business.

The company announced it will show off its technology at the National Fiber Optic Engineers Conference (NFOEC) in Baltimore next month (see Creo to Demo Crossconnect).

Transferring optical technology from other industries to data communications has been tried before -- and not always with success (see APA Optics Inc. (APAT)). Then again, there's always Corning Inc. (NYSE: GLW), which until lately was the ultimate rust-belt-to-datacom success story.

Creo says it has developed an alternative to 3D MEMS (micro-electro-mechanical system) technology, an approach to all-optical switches. The company says its all-optical switching technology will scale up to 4,000 ports, four times greater than announced MEMS-based systems.

“Our plan is to displace MEMS altogether,” says Doug Richardson, director of technology for Creo. “When we first started working on this a year ago, we looked at everyone else’s spec sheets. Then we did what we could to beat them.”

But analysts question the usefulness of Creo’s super-scaleable technology given the fact that large all-optical switch fabrics may not be in high demand.

MEMS technology, which consists of hundreds of tiny tilting mirrors that steer beams of light through a switch fabric, works well on a small scale, but larger matrices are difficult to maintain, say analysts. Nortel Networks Corp. (NYSE/Toronto: NT) and Integrated Micromachines Inc. (IMMI) have both announced that they are developing subsystems that scale to more than 1,000 ports. Others have also announced scaleable MEMS solutions (see MEMS Make It Big?). Corning says it is working on a 256x256 port matrix and Agere Systems (NYSE: AGR) says it has a 64x64 switch on the way. But so far none of these companies has shipped a fully populated fabric.

“It’s difficult to get a MEMS to scale over 16x16 ports,” says Scott Clavenna, president of PointEast Research LLC and director of research at Light Reading. “You can fabricate a design, but to get carrier-class reliability is extremely difficult. The technology behind how you actually change the angle of the reflection seems to be in its infancy.”

Creo’s technology doesn’t use mirrors to steer light beams -- it uses bendable fiber. Each fiber sits behind a lens, which focuses the light and aligns the beam with another lens on the other side of the switch. When a data beam comes in, the fiber is magnetically moved to line up with another fiber across the matrix. As light is transmitted, the lens directs the beam and focuses it on another lens on the other side, which focuses the traffic beam onto the appropriate fiber.

The switch scales modularly, with 12 fiber and lens pairs per module. At NFOEC in July, Creo plans to demonstrate a 32x32 optical switch (three modules on each side). The company says it will also show off a partially populated 1000x1000 switch fabric and will demonstrate fibers that can bend enough to support a 4000x4000 matrix.

The company is getting the word out about its new direction among equipment companies. Tellium Inc. (Nasdaq: TELM), which plans to build a large all-optical crossconnect, says it has already talked to Creo.

“It’s an interesting idea, and we’ve had conversations with them,” says Harry Carr, CEO of Tellium. “Right now we think that MEMS is the way to go, and we’ve already publicly announced that we’re partnering with Corning. But we’re always open to looking at new approaches.”

But the big problem may be with the market itself. All-optical switching technologies have yet to take off, and large all-optical switches may never be needed, say analysts like Tim Anderson from Salomon Smith Barney. He says the industry hasn’t yet decided how far matrices will need to scale.

“The issue is not whether or not MEMS scales,” says Anderson. “The issue is: What scale do we need and what will we need in the future? There is certainly no demand right now for a thousand-port all optical switch in high volume.”

Several equipment companies like Ciena Corp. (Nasdaq: CIEN) and Tellium are developing a hybrid approach that combines electrical switching at OC48 (2.5 Gbit/s) and OC192 (10 Gbit/s) speeds and optical switching to handle traffic at higher speeds like OC768 (40 Gbit/s). Hybrid switches will reduce the need for highly scaleable all-optical switches, because OC768 traffic, which will be switch optically, will likely be a much smaller proportion of the total traffic handled, says Clavenna.

Ross Turnball, an equities analyst specializing in industrial products for Odlum Ltd., covers Creo and wonders why the company would change its focus. He says Creo is a market leader in a sector expected to be worth about $100 billion in 2001.

“It doesn’t make much sense to me,” he says “It surprises me that they would enter a completely new market and spread themselves thin. They seem to have their hands full with the market they’re already in.”

So why is Creo taking on a new market? The answer could be in the numbers. Even though valuations of many optical-networking companies have fallen drastically over the past year, they still carry higher price-to-sales ratios than companies in other industries. For example, Creo currently has a market capitalization of about $944.2 million, with annual revenues running about $700 million, giving it a price-to-sales ratio of a little more than one. Compare this to the Lucent Technologies Inc. (NYSE: LU) components spinoff, Agere Systems, which has a market capitalization of $10.1 billion on revenue run rate of about $5 billion, giving it a price-to-sales ratio of roughly two-to-one, nearly twice that of Creo.

- Marguerite Reardon, Senior Editor, Light Reading
http://www.lightreading.com

For more information on NFOEC, please visit the Light Reading NFOEC Site.

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jssreenath
jssreenath
12/4/2012 | 8:13:27 PM
re: From Graphics to Optics
Anyone care to comment on switch time or the size of the entire system? I think there is a reason why those things were not discussed in the article...
gourk
gourk
12/4/2012 | 8:13:23 PM
re: From Graphics to Optics
re: "Transferring optical technology from other industries to data communications has been tried before -- AND NOT ALWAYS WITH SUCCESS (see APA Optics Inc. (APAT) ). Then again, there's always Corning Inc. (NYSE: GLW - message board), which until lately was the ultimate rust-belt-to-datacom success story."

I do not think APAT needs to be the poster child representing "not always with success". The company is making good progress going forward and has been increasing DWDM sales and has formed what would appear to be a fairly significant technological/ business affilliation with Harris Corp. They have sufficient financial reserves to weather the current optical downturn and technology diverse enough to give them a varied product mix. All of this could have been easily substantiated without resorting to an article from November 2000. Regards, Gourk


foguy
foguy
12/4/2012 | 8:13:22 PM
re: From Graphics to Optics
You are right, APA doing very well. I am expecting big things from this little company.

fog
manoflalambda
manoflalambda
12/4/2012 | 8:13:21 PM
re: From Graphics to Optics
I'd also be interested to see the loss
involved of tweaking (moving?) the lens
at the end of the fiber. Fiber to Lens
mating is one of the detail issues where
loss needs to be minimized. Loss at the
receiving lens would be an interesting
stat as well.

Salute,
Manoflalambda

psAnd of course, no mention of Lucent's
SHIPPING 256X256, and their in developement
1296x1296.... *sigh*
phyguy
phyguy
12/4/2012 | 8:13:21 PM
re: From Graphics to Optics
12 months ago, this sort of diversification would have more than doubled the value of the company.
Moving into optical networking seems like a deliberate attempt to push the stock price down...

ps Fibers moved by magnets? more like smoke and mirrors!
manoflalambda
manoflalambda
12/4/2012 | 8:13:17 PM
re: From Graphics to Optics
Anyone seen a picture or diagram of this. It sounds like the input leg fibers (with Lens attached at end) can be pointed, by magnetics
(how? magnets? fields? metal coated fiber?), in various directions. How far can you deflect it? How many times can you move it? How fast does it more?

Curious,
Manoflalambda
SPARKLE
SPARKLE
12/4/2012 | 8:13:15 PM
re: From Graphics to Optics
Actually, I would say that Ball Corporation easily exceeds Corning as the ultimate "rust-belt to telecom" success story. In fact, if it were not for Perelli's relationship with Corning it is hard to say if they would succeed even in dark cable manufacture as they have.

On the other hand, Ball's Aerospace division is handily converting thier laser communications division into commercial ops purely based upon thier pre-history with the intricacies of glass manufacturing. Yes, this is the same Ball who still is the undisputed leader in canning-jar production...
DickW
DickW
12/4/2012 | 8:13:07 PM
re: From Graphics to Optics
Something I don't understand here... why all this effort to make better switches when you can use a bus.. That apart.. this proposal horrifies me. Magnets moving fibres - no thanks .. MTBF will be far too low for it to be reliable..
trailingedge
trailingedge
12/4/2012 | 7:48:50 PM
re: From Graphics to Optics
are in http://www.creo.com/products/o...

Seems like a 1k by 1k switch fits into a fairly small rack mount package.

Anybody care to comment on the specs?
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