Nortel Nixes Passive Components

The plans of Nortel Networks Corp. (NYSE/Toronto: NT) to become a big player in the passive components business appear to have come to naught, to judge from some detective work undertaken by the crew here at Light Reading.

The spadework –- analyzing manufacturing equipment being auctioned off by Nortel and identifying products withdrawn from its Website –- suggests that the company has dumped a program that might have given it an edge in manufacturing high-performance components.

In particular, Nortel no longer appears to be making Arrayed Waveguide Gratings (AWGs).

The fact that Nortel was making AWGs at one stage might surprise some industry observers, because Nortel hadn’t made any announcements on this score -- not saying whether it’s started or stopped making them. All that a company spokesperson was prepared to say is that Nortel isn’t selling them now and doesn’t have any plans to do so.

However, Nortel hasn’t been able to obliterate all evidence of its past activities. A simple search on Google for Nortel AWGs turns up pages on Nortel’s Website that have been withdrawn.

Nortel also has been selling off huge amounts of equipment that was probably bought for AWG manufacture, in auctions run by Henry Butcher International Ltd. More than 20,000 items from components plants in the U.K., Canada, and Switzerland have been put up for sale, the first auction being held in December 2001 (see Nortel Fire Sale). Another 2,000 lots of equipment, some of it unused and some costing more than $1 million when new, were sold this past Jan. 22.

In the January sale, Nortel’s Harlow, U.K., site offloaded a range of four-inch silicon wafer processing gear such as photolithography, deposition, and etching kit. Since the site made optical rather than electronic components, it's almost certain that this gear was used to make AWGs and more advanced planar waveguide circuits. (Active components are made at Nortel's Ottawa location.)

A former employee says Nortel was doing more than making run-of-the-mill AWGs; it had succeeded in developing particularly low-loss ones. This promised to make AWGs an even more attractive starting point for integrated optics developments (see Photonic Integrated Circuits).

All of this is a far cry from May 2000, when Nortel announced the setting up of its “High Performance Optical Components Solutions” business unit. At the time, it said it would invest billions of dollars in it and create thousands of new jobs (see Nortel Creates Optical Components Unit,Nortel Remolds Its Component Business, and Nortel to Double Production Capacity).

According to reports filed with the SEC, Nortel's components business generated $674 million in revenues and $285 million in gross profit for the quarter ended September 30, 2000, the first full quarter after the components business was launched as a separate unit. A year later, revenues had nose-dived by 94 percent, resulting in an $87 million loss for the corresponding quarter in 2001.

Nortel is planning a further auction of component manufacturing and test gear, this time from its Paignton, U.K., facility on April 10 and 11. Paignton is the home of Nortel's optical module business… for the time being.

— Pauline Rigby, Senior Editor, Light Reading
flanker 12/4/2012 | 10:56:36 PM
re: Nortel Nixes Passive Components How about a story on Corning's new VASCADE R1000 dispersion managed fiber.
RGreg 12/4/2012 | 10:56:35 PM
re: Nortel Nixes Passive Components "A former employee says Nortel was doing more than making run-of-the-mill AWGs; it had succeeded in developing particularly low-loss ones."

Isn't "low-loss AWGs" a contradiction in terms? I would suspect that they got it to work in the lab but then realized it would be horrifically expensive to manufacture.
Light_My_Fire 12/4/2012 | 10:56:30 PM
re: Nortel Nixes Passive Components No surprise that Nortel HPOCS unit went from $674mm to $87mm y/y... an even more precipitous decline than JDSU & NUFO & Co... HPOCS was stuffing the channel in 2000 in anticipation of a spin-off.
benson 12/4/2012 | 10:56:28 PM
re: Nortel Nixes Passive Components RGreg;

Not a contradiction at all!! You haven't kept up with thee latest trends in AWG's. Both Hitachi Cable and NEL are now MASS-PRODUCING AWG's with 2.5-3.0 dB of IL. If you go to their booth at OFC, you'll see them.

MLeigh 12/4/2012 | 10:56:20 PM
re: Nortel Nixes Passive Components The strength of Tier 1 Telecomms Systems Vendors (TSV's) like Nortel, Lucent, Alcatel, etc. is their ability to develop carrier class systems and SELL them in volume. Their superior leverage over a hundred start-up systems players is not their underlying componentry or superior technology. It is their marketing muscle, global engineering support strength and enormous vendor credibility with global carriers.

It just makes no business sense and negatively impacts new product development time-to-market for these same industry elephants to delve into complex, resource-intensive component level R&D when there are a number of specialist vendors out there who can do it better, faster and whose only focus is serving this same TSV community.

This alternative route, of contracting with industry module and sub-systems specialists, allows them to meet their custom requirements without the time and cost impact that it would otherwise have. To give an example, it can take up to 128 2x2 photonic switch components to create a strictly non-blocking 8x8 switch matrix. To integrate VOA (variable optical attenuation) capability into a switch adds many more fibers, connectors and complex control plane requirements. To add dynamically variable monitoring taps and power monitoring adds to this scenario. To integrate the functioanlity of an AWG with a switch takes significant knowledge of both types of modules and the interworking between them.

When a carrier buys from a Tier 1 TSV, they are buying the total solution, including system hardware, software, network management, application software, world-class support, deep-pocket credibility and relationship longevity. The underlying components are transparent to the Carrier customer and therefore represent a "best-of-breed" competitive outsourcing opportunity that ensures flexibility, lowest cost and highest quality.

In conclusion: "bravo" Nortel, Lucent and Alcatel for seeing the light (pun intended) and divesting or dropping areas of the business that don't serve its broader interests. They get to have their cake and eat it too.

Respectfully, Michael Leigh.
macleran_f1 12/4/2012 | 10:56:19 PM
re: Nortel Nixes Passive Components Rumors are a reality. Tuesday, more Nortel employees got the axe and this continued through till Thursday.

Anyone have a job??
exnortel2 12/4/2012 | 10:56:18 PM
re: Nortel Nixes Passive Components Which location(s) are affected ?
carb5 12/4/2012 | 10:56:05 PM
re: Nortel Nixes Passive Components Can you back this up ,macleran_f1?

Have you any real numbers, and locations?

Any press releases/newspaper website articles?

BestAWG 12/4/2012 | 10:55:41 PM
re: Nortel Nixes Passive Components
Again, some companies push the envelope in technology by offering "best in class" AWG's that is lowest still compared to NEL and Hitachi. This small innovative comnpany called Scion Photonics, located in Milpitas, CA now offers AWG's with <2.3 dB IL Gaussians and <4.3 dB IL for Flat tops. That away Scion. Sorry NEL !!!
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