MEMX Starts Anew on 3D MEMS
MEMX is a just getting started. The company, which is being spun out of Sandia National Laboratories, yesterday officially announced the appointment of its president and CEO and the close of its second round of funding, the amount of which hasn't been disclosed (see Mike Hodges Joins MEMX).
MEMX’s emergence comes at an interesting time in the development of all-optical switch modules. Simple 2D MEMS, which switch lightpaths from one mirror to another across a two-dimensional matrix, are currently being used in most all-optical switches, but these fabrics don't scale easily beyond 32 ports. To increase scaleability, companies have been developing 3D MEMS, which can be used to build a three-dimensional array of mirrors that can reflect light in multiple directions.
But several issues have plagued 3D MEMS development. For one, the packaging of the devices is still done by hand, requiring fiber alignments in the sub-micron range. Also, the control of 3D MEMS is analog, which makes it much more complicated than the digital control of 2D MEMS. And because the silicon used to build 3D MEMS is also immature, there are reliability questions.
Just last week Onix Microsytems Inc., which had recently raised $77.5 million, cut back its staff by 25 percent and put its 3D MEMS product development on the back burner (see Onix Follows in OMM's Footsteps). A month previously, OMM Inc. also shelved its 3D MEMS development and cut 100 more jobs (see OMM-inous News). Both companies are instead focusing on development of their 2D MEMS products.
“We need to stretch our cash,” says Meng-Hsiung Kiang, co-founder and director of business development and product management for Onix. “So we have to be careful how we spend our money. The market for large-scale switch fabrics seems to have been pushed out.”
Another MEMS startup Integrated Micromachines Inc. (IMMI) is also rumored to be sidelining its 3D MEMS endeavors. But company officials deny these rumors.
"We're vigorously pursuing 3D MEMS and we're talking to multiple customers," says Steve Walker, IMMI's director of subsystem integration. "Everything we've talked about for the last six months is full steam ahead."
Why would MEMX pursue 3D MEMS when other startups are retreating? The company is still keeping specifics of its technology quiet, but two factors bode well for the company. For one, the new CEO is Mike Hodges, a CEO-for-hire with a track record of jump-starting startups. His most successful venture so far has been Tellium Inc. (Nasdaq: TELM), where he served as CEO from January 1999 until February 2000. While there, he hired the company’s current CEO, Harry Carr.
From Tellium, Hodges went to Bandwidth9 Inc. for four months and soon moved onto Onetta, an optical amplifier startup that has raised $68 million, where he hired former Redback Networks Inc. (Nasdaq: RBAK) CEO Dennis Barsema as permanent CEO for the company. Since leaving Onetta, he has served as CEO for Silvan Networks -- a Layer 7 IP routing company -- until the middle of the summer, when he finally took on the role at MEMX, another small company which still has only about 15 employees split between two development sites in Albuquerque and Sunnyvale, Calif.
But this time, Hodges says he plans to keep his title, instead of moving on in a few months. Others who have worked with him in the past say they have no doubt he will be successful as a long-term CEO.
“He’s a very strategic thinker,” says Krishna Bala, co-founder and chief technical officer of Tellium. “He was able to absorb Tellium’s financials and our business in a very short amount of time. If he decided to stay with a company, I’m sure he would do a great job. He’s a sharp guy.”
The second positive for the company is its tier-one venture backing. While details of the latest funding round haven’t been released, the company has announced that big venture firms Sequoia Capital and Austin Ventures are involved. Additionally, Sandia, MEMX’s parent company, had already pumped about $100 million into 3D MEMS development before the company was spun off last year, says Hodges.
Hodges has his own ideas about why competitors are getting out of the 3D MEMS market. He says that 3D MEMS technology is complicated and that his competitors don’t have viable products, so they are using the carrier crunch as an excuse to scarper off.
“I guess I would say the market is there if the technology works,” he says. “They didn’t have a technology that works. We do.”
But in light of recent research from analysts, the 3D MEMS market doesn’t seem all that appealing. Over the next four years, the market for large, scaling, all-optical switch fabrics is only expected to be a small fraction of the overall MEMS market, they say. Marlene Bourne, with Cahners In-Stat Group, says photonics switches greater than 32x32 ports (specifically 64x64, 256x256, and 1,000+), are forecast to generate revenues of only about $130 million in 2005. Compare this to the total MEMS market, which is expected to rise from $67 million in 2001 to $2.3 billion in 2005, according to a report she published last week.
What’s more, she adds, the bulk of revenues in the 32x32 port and above category are for fabrics that would support 64x64 ports -- and rarely for the massive fabrics that scale to 256x256 ports and above.
Tim Anderson, an equities analyst with Salomon Smith Barney, agrees that the need for large-scale switches is not yet on the radar screens of most carriers. "The market for all-optical switches still exists," he says. "But it’s the timing and size that are still moving targets."
Despite the exit of OMM and Onix from the 3D MEMS scene, there are still plenty of players competing in this space, including big names like Corning Inc. (NYSE: GLW), Lucent Technologies Inc. (NYSE: LU), and Nortel Networks Corp. (NYSE/Toronto: NT).
Tellium's Bala is especially cautious of startups in the current economic climate: "I’m not completely convinced that they will all be around at the end of the day. But if other companies are focusing on 2D MEMS solutions and pushing 3D development further out, it could give a startup like MEMX a chance to really get the technology right.”
- Marguerite Reardon, Senior Editor, Light Reading
http://www.lightreading.com
Many VCs have funded optical networking companies and continue to prop up their respective funded companies in spite of the fact that there is no chance of survival of these companies.
I strongly believe that any significant break throgh in the optical arena would come from Nortel, Lucent and Alcatel etc.