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Kymata Goes West

BURLINGAME, Calif. -- A Scottish component vendor made an aggressive U.S. debut at the Opticon conference here this week, signaling a rise in activity surrounding optical integrated circuits.

Kymata Ltd., a privately held startup based in Livingston, U.K., picked the conference venue to announce the opening of sales offices in California, Massachusetts, and New Jersey. The Pleasanton, Calif., office will double as U.S. headquarters and will contain R&D facilities.

Kymata makes optical integrated circuits (ICs), which miniaturize and cram optical component functions like arrayed wave guides (AWGs) onto silicon wafers. Despite some drawbacks, which can include a tendency to lose light signals, the technique promises to streamline the creation of optical networking gear, in the same way that silicon components revolutionized the creation of computers thirty years back.

Kymata's chief targets are DWDM (dense wavelength-division multiplexing) vendors, which it hopes will opt to deploy its optical ICs (which typically support data rates from 2.5 to 10 Gbit/s) to get equipment to market faster and more efficiently than they can today. "There are phenomenal material and manufacturing costs associated with creating elements for DWDM equipment," says Vivek Tandon, Kymata's director of strategic business development. "We can substantially reduce those costs."

Analysts are generally bullish on the possibilities of optical ICs. "Silicon is available in big pieces at lower cost than the other elements used in optical components," says one venture capitalist, who spoke anonymously at Opticon. "Also, there's a wealth of silicon expertise out there from traditional players like Intel that can be tapped to help create new parts."

Others agree. Jay Liebowitz, director of optical components at RHK Inc., says Kymata and other companies that can help integrate optical functions in silicon components will "likely aid" burgeoning growth in optical components. According to Liebowitz, that market is "growing at 50 percent a year and is expected to reach $8.6 billion by 2003."

Despite the glowing predictions for the market itself, Kymata and other newbies face a tough road ahead. There's stiff competition already from a small, select group of optical IC makers who are expanding on their own, while sewing up contracts with key equipment vendors.

Component powerhouse JDS Uniphase (Nasdaq: JDSU), for instance, recently staked its own claim in the optical integrated circuits market by announcing it plans to acquire SDL Inc. (Nasdaq: SDLI) for a whopping $41 billion (see JDSU/SDL: A Component Powerhouse). And Bookham Technology PLC (LSE: BHM; Nasdaq: BKHM) blew out of the gate with a 70 percent share-price increase in post-IPO trading in April (see Bookham Technology PLC (BKHM)). Both JDSU and Bookham count leading vendors like Nortel Networks Corp. (NYSE/TSE: NT) among their chief customers. Kymata, in contrast, can't name a single customer so far.

Still, Kymata's off to a scrappy start. The U.S. expansion is the latest in a series of moves Kymata's made since its formal launch in February. In March, the vendor scored $89 million in funding collected in three rounds from a range of investors, including ACT Venture Capital, Bowman Capital, ComVentures, Kleiner Perkins Caufield & Byers, Telesoft Partners, and Europe's 3i. British Telecom, The University of Glasgow, and the University of Southampton, U.K., also own shares in the startup.

Kymata has used the funds to expand. By May, it had opened a second office in Kanata, Ontario, and made its first acquisition -- BBV Software BV of Enschede, the Netherlands, which makes software for designing passive optical components. Since BBV is privately held, too, the transaction value was not disclosed.

The purchase of BBV will enable Kymata to offer its customers some much-needed help in creating their wares, Tandon says -- an added extra that could help it glean customers from emerging vendors in the metro space, who may not have a lot of resources to devote to component integration.

Kymata is now up to 250 employees, 30 percent of whom are engineers, but says it has no plans to go public, at least until next year.

-- Mary Jander, senior editor, Light Reading http://www.lightreading.com

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