OMM Files for an IPO

Light Reading
News Analysis
Light Reading
9/18/2000



OMM Inc. filed for an IPO with the Securities and Exchange Commission last Friday (Sept 15). It aims to raise $100 million; the number and price of the shares will be set later.

OMM makes optical switching subsystems, the guts of so-called all-optical switches that are expected to revolutionize telecom networks.

It's the first startup in this field to take the plunge with a public share flotation. In other words, its move is significant. OMM thinks it’s done enough to convince investors that the arrays of tiny tilting mirrors it uses in its subsystems will become the switching fabric of choice in the future.

So, has it done enough?

In one respect, it certainly has. In the past few months, OMM has won backing from three heavyweight vendors -- Alcatel SA (NYSE: ALA), Siemens AG (Frankfurt: SIE), and Sycamore Networks Inc. (Nasdaq: SCMR). They’ve all invested in OMM and are working with it to develop optical cores for future switches.

What's more, OMM’s S-1 filing names some surprise customers that have also bought its kit: Cisco Systems Inc. (Nasdaq: CSCO), Corvis Corp. (Nasdaq: CORV), and Nortel Networks Corp. (NYSE/Toronto: NT).

However, all of this needs to be taken with a grain of salt. For a kickoff, OMM’s revenues for the first six months of this year total a mere $413,000. In other words, folk are playing with OMM’s products in their labs, just as they’re probably playing with other startups’ prototypes.

And some of OMM's customers make no secret of having other irons in the fire. Alcatel has said it’s also backing bubble-jet technology from Agilent Technologies Inc. (NYSE: A) (see Alcatel Backs the Bubble). Nortel has already acquired Xros Inc., a competing startup, for stock worth $3.25 billion (see Nortel Buys a Monster Crossconnect). Only today, Nortel announced that it was also working with Analog Devices Inc. (NYSE: ADI) on other MEMS (micro-electro-mechanical systems) developments (see ADI, Nortel Coproduction Planned). And although Corvis won't spill the beans on what's inside its current all-optical switch, it clearly isn't based on MEMS (see Patent Points to Corvis Secrets ).

Plenty of observers are still skeptical about MEMS, the technology behind OMM’s tiny tilting mirrors. Their moving parts, which could jam, wear out, or become damaged in earthquakes, make them intrinsically unreliable and unsuitable for telecom networks, they say.

One other telling point comes out of OMM’s S-1. The company talks about developing 3-dimensional MEMS subsystems that could be used in switches with thousands of ports. But right now, the biggest subsystems that it’s actually shipped are based on simple 2-dimensional technology. The mirrors flap up and down in one plane, rather than tilt in any direction, which limits the number of ports to a mere 16 by 16.

In other words, OMM may be leading the charge on optical switch subsystems, but it’s very early days. Investing in OMM will be quite a gamble.

-- Peter Heywood, international editor, Light Reading http://www.lightreading.com

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