The lights are still on at Lightwaves2020 Inc.

Not all of them, mind you. Large chunks of the company's building in Milpitas, Calif., built to house 300, stay dark all day. But while other optical components startups have fallen off the map, Lightwaves2020 plows on.

The company has slimmed to 45 employees from an apex of 86, and its integrated optics products have gone into stasis in favor of more immediately sellable variable optical attenuators (VOAs) and Erbium Doped-Fiber Amplifiers (EDFAs). It's an oft-repeated story that tends to end in bankruptcy or hibernation, but Lightwaves2020's investors have made no move to shut down.

That's because the "investors" consist of one guy. Founder Jing Jong ("J.J.") Pan has paid for the entire company, including construction of the 55,000-square-foot headquarters, and can keep it running as long as he likes. Think of it as an expensive hobby. "The word from people who have worked with him recently is that Lightwaves2020 is his pet project," says one competitor.

This is the largesse of the telecom boom put to work. With wife Theresa, Pan founded components firm E-TEK Dynamics Inc. in 1983. The company skyrocketed to fame with a 1998 IPO and a $15 billion acquisition by JDS Uniphase Corp. (Nasdaq: JDSU; Toronto: JDU) in 2000, at which point E-TEK traded at more than $200 per share (see JDSU/E-Tek Merger Approved: No Surprises).

Pan had already left E-TEK in 1997, a move he claims was prompted by a desire to keep funding cutting-edge research. "At the beginning, Lightwaves2020 was doing planar waveguide structures and even developed an organic thin film for those structures," with an eye toward future optoelectronic ICs, Pan says. "We have a crystal growing facility and also very advanced fiber Bragg grating fabrication." He adds that the company completed a wavelength blocker aimed at Wavelength Division Multiplexing (WDM) transmissions with a 50GHz spacing.

All told, Pan says he's sunk $67 million into Lightwaves2020, barely a dent in his E-TEK fortune, say most industry sources. (SEC documents show the Pans held at least 10 million E-TEK shares as late as 1999 -- putting their potential fortune in the billions). At least some of the money has been spent in fine telecom-boom fashion. The headquarters, which Pan had built for the company, is modern and plush, with a fountain still running in the lobby. But the front desk is unstaffed, and the company has enough spare room to keep its fully assembled OFC booth on a balcony.

Several projects have been shelved, represented by doors to dormant lab rooms with nameplates listing next-generations products such as an erbium-doped waveguide amplifier (EDWA). The company is now working on more commonplace subsystems with a next-generation spin -- VOAs that sell for a low $120, or small EDFAs that exploit the company's work in components integration.

The new strategy is slowly bearing fruit. Lightwaves2020 is seeing a trickle of revenues -- between $1 million and $2 million per year -- from customers including ADVA Optical Networking (Frankfurt: ADV), Fujitsu Ltd. (OTC: FJTSY; Tokyo: 6702), Mahi Networks Inc., Marconi Corp. plc (Nasdaq: MRCIY; London: MONI), and Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA). Pan also continues to receive royalties for E-TEK patents.

Pan himself doesn't come across as particularly flamboyant, and competitors note that Lightwaves2020 was started with little fanfare. "My impression is that he just loves to work," one says. "He had a ton of money and probably didn't want to retire," speculates an industry investor.

But competitors aren't sure Lightwaves2020 can make much of a dent, particulary given the brutal components market.

"It's hard for them to compete against the Asian/American component manufacturers -- Oplink, AFOP, DiCon, and so on -- on the low-cost products," one industry executive notes. That's partly because Lightwaves2020's manufacturing remains in the U.S., while competitors increasingly shift production to cheaper locations in Asia. And at the high end, the company has to battle against components kingpin JDSU and relative heavyweights Avanex Corp. (Nasdaq: AVNX) and Bookham Inc. (Nasdaq: BKHM; London: BHM).

Pan seems willing to stay patient with the business, realizing telecom spending isn't likely to explode any time soon. "We're already seeing signs the carriers will increase capital expenditures, but it's gradual," he says.

— Craig Matsumoto, Senior Editor, Light Reading