Iolon Lands Lucent Deal

A further sign of the tunable laser market finally finding its feet is likely to emerge at the NFOEC tradeshow later this month, when Lucent Technologies Inc. (NYSE: LU) and Iolon Inc. announce a contract.

Under the deal, Lucent will incorporate Iolon's lasers in the next release of its LambdaXtreme DWDM platform, due out in October. And although the contract probably won't generate huge revenues for Iolon in the near term, Lucent's use of tunable lasers in its equipment is likely to influence general attitudes towards the technology.

"We view this as an industry-changing event," crows Saeid Aramideh, Iolon's VP of marketing.

Iolon's coup follows hard on the heels of a similar landmark announcement: Tunable lasers from Agility Communications Inc. will be incorporated in Lightscape Networks Ltd. metro gear that's already in widespread use in carrier networks (see Clouds Lift on Tunable Lasers).

It's worth pointing out that Fujitsu Network Communications Inc. (FNC) has already taken the big step of deciding to put tunable lasers in all its Flashwave DWDM systems. "We only ship DWDM systems with tunables in," claims Mike Susong, Fujitsu's director of industry relations. But there's a big difference between Fujitsu and Lucent's situations. Fujitsu's tunable lasers are developed internally, while Lucent has to source them from a third party.

The big question is, will this deal turn into a large number of device shipments for Iolon? The answer appears to be, alas, not yet. Lucent's LambdaXtreme isn't actually shipping in volume right now, although it is in trials. But, being a DWDM core transport platform, it isn't likely to ship in large quantities any time soon -- the long-haul transport market is as dead as the proverbial dodo.

On the other hand, some industry pundits maintain that the slump is only temporary, if a bit prolonged. And when recovery does come around, the LambdaXtreme is poised to become the leading DWDM platform -- according to Lucent, anyway.

Anand Krishna, director of product management for the LambdaXtreme, claims that it's the only available DWDM platform that supports OC768 (40 Gbit/s) line rates. It can carry up to 64 wavelengths at this rate, or 128 channels at OC192 (10 Gbit/s) -- serious capacity (for more details, see Lucent Lays on More Lambdas ).

Trials of the platform have been "very successful" so far, he claims, with half a dozen leading operators expressing keen interest (see Lucent: US Carrier to Test 40-Gbit/s). The only named customer is Deutsche Telekom AG (NYSE: DT).

Customers that have tested release one of the LambdaXtreme won't need to retest it in order to switch to tunables, he insists. Lucent says it has done extensive performance and reliability testing, which is almost complete.

Lucent's decided to back tunables all the way. From October, every LambdaXtreme shipped will be populated with tunable lasers, both as primary transmitters and as backups. The system will contain no fixed wavelength lasers at all. "Wherever there is an OEO [optical-electronic-optical] conversion point, Iolon's lasers will be deployed," Krishna says.

Lucent says it made the decision to go with tunable lasers because it made good economic sense. According to Krishna, using tunables will afford Lucent's customers savings of 75 to 80 percent on the cost of spares. Those savings will be significant even when the system, which has a maximum of 128 wavelengths, is only populated with 16 wavelengths, he claims. Instead of buying 128 (or 16) different "part codes" to hold as spares, the customer only needs to stock a few.

Of course, this argument only works if the cost of the tunable laser is not much greater than its fixed-wavelength alternative. Lucent appears to have negotiated a good deal with Iolon in this respect. According to Krishna, the price premium is in the single-digit percent. In other words, Iolon has priced its tunable laser at a premium of less than 10 percent above fixed wavelength devices.

This scotches criticism from some analysts, including Lisa Huff from Communications Industry Researchers Inc., that Iolon's approach of buying in parts and assembling them wouldn't allow it to bring prices down sufficiently. On the contrary, Iolon's approach may have secured the deal, as it enables the startup to turn orders around quickly.

Lucent is lining up a second source for tunable lasers, although it isn't at liberty to say which company this might be.

— Pauline Rigby, Senior Editor, Light Reading
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optigirl 12/4/2012 | 9:48:51 PM
re: Iolon Lands Lucent Deal How far does Iolon have to bend over backwards to make this deal? Given Lucent's lack of orders for their product it is a bit difficult to see any requiement for real volumes coming from Iolon. Another issue to consider is the competition from other suppliers for said tunable products. This would seem to be a case where a big company squeezes the heck out of a small company for a price concession and keeps looking until it finds someone.

If they are in fact buying and packaging then there is simply no way for them to make any money on this deal. Sounds like a way for Iolon to establish market share but at the expense pf profit....a strategy that never works.
opticalwatcher 12/4/2012 | 9:48:49 PM
re: Iolon Lands Lucent Deal Maybe I'm just a bit punchy today, but did I read this right? Did DT go with the lamda router instead of telliums switch? I know they were testing both switches this year, but I don't recall reading any announcements. If I'm wrong, does anyone have any clues as to how the testing is progressing?

thx in advance
manoflalambda 12/4/2012 | 9:48:47 PM
re: Iolon Lands Lucent Deal opticalwatcher:
Maybe I'm just a bit punchy today, but did I read this right? Did DT go with the lamda router instead of telliums switch? I know they were testing both switches this year, but I don't recall reading any announcements. If I'm wrong, does anyone have any clues as to how the testing is progressing?

DT punted both products as it had no CapEX to purchase either. As to how the testing went? Dunno.

You might be confusing the separate Xtreme testing DT did vs the LambdaRouter/Aurora testing.

BobbyMax 12/4/2012 | 9:48:42 PM
re: Iolon Lands Lucent Deal To this date, more than 70% of the Tunable Laser companies have disappered from the US. The technology is a very expensive technology. Its importance in terms of its use is questionable. In addition, it is very expensive technologies.

The most noticable drawback of Tunable Laser Technology is that it is very expensive.

At a time when optical companies are disappearing from the face of the earth, it is rather amusing as to how iolon is confusing the issue.
iamnoone 12/4/2012 | 9:48:38 PM
re: Iolon Lands Lucent Deal Why such negativity? While I'm envious of their apparent success, I think it will help all of us in the optical industry when new technologies are used. It will open up even more possibilities for other new technologies.

If they are willing to be the loss leader, good for them. If they can make money, even better, since that will in turn feed back into the test, measurement and packaging industry. I believe that money goes around and around and around (like rain).....
lame_duck 12/4/2012 | 9:48:35 PM
re: Iolon Lands Lucent Deal I suppose there are many ways to bash this deal but logically speaking there are only two ways to think about it:

1. This is a good business deal or,

2. This is a bad business deal.

There is really only one way in which this could be a good business deal, and it is a pretty boring scenario: tunable lasers make sense in terms of cost savings to carriers and iolon has a laser that they think they can make money off of.

It's far more fun to expound on why this could be bad business. Some possibilities include:

-iolon's technology is far too expensive for Lucent's application and they will never make any money off of it. Perhaps Lucent doesn't know this and they will eventually can the product because iolon dies. Or Lucent does know this but are going ahead anyway just to make some news. Either way somebody didn't do their homework.

-iolon's technology is cost effective but there's no business in long haul anyway so it doesn't matter. Lucent will eventually kill the product and would have wasted their time. But iolon gets some notoriety in the meantime.

-Tunable technology is stupid and will never get into the network so it doesn't matter what the cost story is. Both Lucent and iolon crash and burn in the process.

On the "bad business" side of the analysis the list goes on and on. Kinda fun to play this out but no matter how you cut it, this line of reasoning ends with the conclusion that Lucent is blowing it big time and iolon burns up just like all the others who couldn't manage their way out of the Telewreck. Possible, but it is also possible that Lucent knows a thing or two about what the carriers need and, eventually, will buy when they get around to buying again.

The next phase: do Lucent's competitors join the fray or do they decide up front that Lucent is out to lunch and risk the possibility of getting left behind.
whyiswhy 12/4/2012 | 9:48:34 PM
re: Iolon Lands Lucent Deal Iolon has priced its tunable laser at a premium of less than 10 percent above fixed wavelength devices.

Have you ever torn the lid off of a tunable laser and looked inside? Especially Iolons? Looks like a mechanical marvel inside.

There is no way in Hades it can only cost a few percent more than a fixed wavelength device to make!

LU, Iolon: All the stupid limited partners that invested in the bubble are broke and out of work. Those that remain are pretty savvy, and will see through this desperate stunt like X-rays see through paper.


curad 12/4/2012 | 9:48:31 PM
re: Iolon Lands Lucent Deal Ever rip the cover off of a disk drive and look inside? Mechanical marvel, that. Amazing that anyone can make money off of it at a selling price of a few hundred dollars. To be sure many disk drive companies can't make money off of it but some (ok, one) can.

Is the Iolon laser more complicated than a disk drive?
OpticKnowledge 12/4/2012 | 9:48:22 PM
re: Iolon Lands Lucent Deal Can you tell me how Iolon is "confusing" the issue?

photons-r-us 12/4/2012 | 9:48:21 PM
re: Iolon Lands Lucent Deal There are alot of bashers here who revel in negative news. Good for Iolon!, this deal shows a real bright spot in a dismal marketplace.

There are alot of weak companies that need to be weeded out before we can get back to a healthy market. The strong will be left standing and Iolon is one of them.
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