It's time once again for everyone's favorite game: What's Up With Infinera Inc.?

The well funded startup continues to be an enigma wrapped in a riddle wrapped in a warm puff pastry... or whatever-the-quotation-was. But whatever it's doing, it apparently works well.

Several Silicon Valley sources say the company is nearing production on a revolutionary new integrated optical component that has OEMs salivating over the potential for cost-savings in their next-generation optical systems. Infinera may already have a backlog of orders in the hundreds of millions of dollars, a source tells Light Reading. Sources also say the company's out raising a third round of financing, and it's a whopper: Word is, Infinera's looking for $100 million total, at a pre-money valuation in the range of some $200 million.

Infinera officials are keeping mum, but Mark Yin, vice president of marketing, did say that not all of the numbers are correct.

"It sounds like they're made up," he says. (He wouldn't say whether we're at least close.) "There's really nothing to report at this time. With news like that, we would definitely be telling Light Reading about it."

Several theories circulate about the company's mysterious new product. One story holds that Infinera is working on an optoelectronic chip that can regenerate signals without the use of an amplifier -- something that could threaten a whole raft of component vendors, including Goliath JDS Uniphase Corp. (Nasdaq: JDSU; Toronto: JDU). The company is also said to be designing the chip in a manner that can be more easily manufactured in volume, which would solve one of the greatest problems with the optical industry to date -- components that are difficult to manufacture and thus too expensive.

It's likely that Infinera's component is centered on an indium phosphide (InP) semiconductor that almost certainly includes active photonics (a laser, in other words).

Another guess is that Infinera is up to something more ordinary, such as a chip that will pack many more channels onto a line card. If so, it wouldn't be the first well hyped startup with an anticlimactic punch line.

"Infinera will have a very compelling value proposition," says Peter Wagner, an partner at Accel Partners, which is an investor. "Is it interesting? Yes."

Infinera's strong pedigree and deep-pocketed investors have added to the story (see Zepton Has an $86M War Chest and More on Infinera (née Zepton)). CEO Jagdeep Singh was the founder of Lightera, which became the crucial CoreDirector product at Ciena Corp. (Nasdaq: CIEN). Also on board are Lightera co-founder Drew Perkins and SDL/JDSU veteran David Welch.

The company has already raised more than $100 million, with investors over the years having included Accel, Agilent Technologies Inc. (NYSE: A), Applied Materials Ventures, Benchmark Capital, Juniper Networks Inc. (Nasdaq: JNPR), Kleiner Perkins Caufield & Byers, Sprout Group, Venrock Associates, and WorldView Technology Partners.

Anyway, with companies usually funded in 12- to 18-month increments, it's about the right time for Infinera to pass the hat again. Its last round came in mid-2001, when the company was still called "Zepton." [Ed. note: Wasn't that Superman's dog?]

If the company is coming close to production, it makes sense that it would now be looking for a sizeable round. The $100 million "basically implies they'll be ramping in 03," says one VC not involved with Infinera. "I had the impression that what they were doing wouldn't ramp until a year or two from now."

"I'd done the math on the money they raised and their burn rate, and certainly within the next 12 months they would need money," says Bruce Graham, an Infinity Capitalpartner who stresses that he knows nothing about Infinera's inner workings. Infinera did pony up for its own small manufacturing facility and was building its own prototypes, so it's feasible that the company's seen enough action to chew up previous funding.

— Craig Matsumoto, Senior Editor, and R. Scott Raynovich, U.S. Editor, Light Reading