Nufern: Independence Is Key

DALLAS -- NFOEC -- In an industry where the competition is growing harsher by the day, specialty fiber startup Nufern is hoping more component vendors will discover the benefits of using an independent sub-component supplier.

At the NFOEC tradeshow in Dallas this past week, the company announced that it is expanding its fiber family with six new application-specific fibers aimed at helping component producers lower the cost and improve the performance of their products (see Nufern Displays Fiber at NFOEC ).

That is, of course, the main goal for most specialty fiber vendors these days. But unlike several larger companies like Corning Inc. (NYSE: GLW) and 3M Company, Nufern only produces specialty fiber -- not the components in which it's being used. This, it contends, gives it more credibility in its dealings with customers.

Just as JDS Uniphase Corp. (Nasdaq: JDSU; Toronto: JDU) was founded on the idea that systems vendors like Cisco Systems Inc. (Nasdaq: CSCO) and Ciena Corp. (Nasdaq: CIEN) wouldn’t want to buy their optical components from archrivals Lucent Technologies Inc. (NYSE: LU) and Nortel Networks Corp. (NYSE/Toronto: NT), Nufern was founded in March 2000 with the distinct objective of providing component vendors with an independent source of specialty fiber.

“We’re an application-specific manufacturer,” says Nufern’s director of applications engineering Bill Tamm. “Not a boutique.”

Of course, not everyone agrees that it’s preferable to be independent. Furukawa Electric Co. Ltd. subsidiary OFS, one of Nufern’s main competitors, claims that being part of a larger organization allows it to tap into state-of-the-art research and development, and gives it invaluable foreknowledge of new needs appearing in the component market. “If you know the application, you can be ahead of the curve in dealing with the fiber,” says OFS director of optical fiber research Dave DiGiovanni.

No matter whether customers feel more comfortable buying sub-components from an independent supplier rather than a competitor or not, the harsh market realities facing component vendors mean that they aren’t buying much of anything from anyone at the moment.

Nufern has probably felt the pinch. It has traditionally targeted manufacturers of components like Erbium Doped-Fiber Amplifiers (EDFAs) and Fiber Bragg Gratings (FBGs)), which are mostly used in long-haul networks -- a market that has all but dried up.

Of course, since it’s a private company, it’s hard to tell exactly how Nufern is doing. While it claims to have a number of customers for its newest products, it won’t reveal them, insisting that companies don’t like to divulge what kind of fiber they use in their components. And while the Nufern’s CFO, Jeff Dobish, claims that the company’s two funding rounds so far have brought it enough cash to carry it well into 2004, he won’t say how much the company has received, or how much it has spent. “We’re well funded,” is as chatty as he gets.

But Nufern’s product offerings show that the vendor has realized it needs to move in a new direction if it wants to stay afloat in the current market. Like many other sub-component vendors, it seems to be shifting its focus more towards the metro market, offering cheaper, smaller form-factor fiber. Two of the company’s new fibers are 80 micron: its C-band erbium doped 80µ fiber and its expanded line of 80µ cutoff fibers. While these fibers have the same core size as the traditional 125µ fibers, which allows them to carry the same amount of power, their cladding is smaller. This means that they can fit into smaller components.

Because they are sturdier and can tolerate more handling with fewer cracks and stresses, smaller form-factor fibers are better suited for metro and last-mile deployments, which tend to take place in less controlled environments than do long-haul deployments.

“Customers are asking for smaller form factor, reduction in cost, but still high-quality products,” Tamm says.

“It’s win-win,” says Nufern’s marketing manager Sylvia Digby. “Collectively, I think what we’re always trying to do is enhance the performance of our fibers so our customers can enhance their components. We aim to make products that can make them win.”

StockerYale Inc. (Nasdaq: STKR), another specialty fiber competitor, was also showing off a new erbium-doped 80µ fiber at NFOEC, claiming that it's working on a long line of other 80µ fibers (see StockerYale Dopes Fiber). “Smaller form-factor fibers also mean lower cost to manufacture, and they’re not as sensitive to bending,” says Paul Jortberg, the senior vice president of sales and marketing of optical components at StockerYale.

But no matter how many low-cost solutions are offered, the reality is that not many companies are looking to replenish their fiber stock. “Everyone wants to do as much as they can with what they already have for less,” Digby admits. “Everyone has inventory.”

If Nufern thought that NFOEC this year would be the ideal place to unload its new and smaller fibers, it was probably setting itself up for disappointment. Sitting alone at the Nufern booth, watching the occasional exhibitor walk by, Digby admited that she had only had six leads during the first two days of the conference. “You know the sales aren’t going to come today or tomorrow,” she said “But some companies do have money… It just takes one really good lead that turns into a great order, and the conference is worth it.”

The ghost-like feeling resting over NFOEC this year also encouraged another growing trend among specialty fiber vendors like Nufern and StockerYale. Both companies say they are emphasizing their business outside of the telecom industry, beefing up their efforts to sell fiber for military uses, medical applications, and industrial automation. Jortberg says that, while StockerYale has always focused on these areas, “It’s certainly getting more attention with the telecom slowdown."

— Eugénie Larson, Reporter, Light Reading
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