Highwave Hits Low Tide
The Lannion, Brittany-based company made a paltry €720,000 (US$865,000) in the fourth quarter of 2003 -- and has now undergone a fourth round of layoffs, bringing staff numbers down to 50, according to company spokeswoman Christiane Segalen (see Poor Results Prompt Layoff at Highwave).
It's another example of an optical components company tightening its belt, but Highwave probably holds the record for the amount of belt tightening it's had to do. At one stage, it had close to 1,000 -- that's one thousand -- on staff!
Highwave grew big in a matter of a few years, and grew small again almost as fast. It started life by being spun out of CNET, the R&D division of France Telecom SA (NYSE: FTE) in March 1998. And it went public on the Nouveau Marche of the Paris Stock Exchange in June 2000 at the peak of the telecom bubble (see HighWave to List on Paris Exchange).
Around the same time, Highwave bought no fewer than three other businesses, with the aim expanding beyond its core amplifier technology. They were the telecom business of Jobin Yvon SA in June 2000, thin-film filter specialist Shakticom SA in December 2000, and Cisco Photonics France SA in March 2001.
Almost immediately, its troubles began. As the company prepared itself for massive increase in production, its customers were already becoming leery about committing to large orders. In the early part of 2001, Highwave had been profitable, but its revenues declined sharply, putting it back in le rouge -- where it has stayed ever since.
Indeed, in early 2002, the company was saved from impending bankruptcy by a last-minute finance deal worth €32 million (US$38.4 million at today's rates) from three private equity investors: U.S. venture capital firms Newbury Ventures and Technoventures agreed to contribute €11 million each; Deutsche Bank's London-based private equity arm, DB Capital Venture Partners, agreed to inject €9.95 million.
Highwave also managed to raise cash by selling off some of its business units, including the bulk grating business it had bought from Jobin Yvon for €10 million, which was eventually sold to a startup, Yenista Optics SA, for an undisclosed, but presumably tiny, amount last summer.
Some think that Highwave should have focused more on its core competency -- amplifiers. "If you have an amplifier where can you add value?" ponders Michiel van der Keur, CEO of Yenista, a former executive with CNET and Corvis France (formerly Algety). "It's either the pump laser, the fiber, or the fiber Bragg gratings. Highwave is very good at making fiber, and very good at making Bragg gratings. But they don't have the pump. I think they realized too late that they should have partnered with someone making pumps."
All the major players in the amplifier market changed quickly, with Corning Inc. (NYSE: GLW) selling its amplifier business to Avanex Corp. (Nasdaq: AVNX), and Nortel Networks Corp. (NYSE/Toronto: NT) selling its amplifier and all-important pump laser businesses to Bookham Technology plc (Nasdaq: BKHM; London: BHM) (see Avanex to Buy Alcatel, Corning Units and Bookham Buys Nortel's Components Biz). Highwave could possibly have taken advantage of the situation, but didn't.
"Things happened so fast that they [Highwave] missed the deal, and now its tough for them," says van der Keur
— Pauline Rigby, Senior Editor, Light Reading