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Mitel's Widget Draws Skepticism

Light Reading
News Analysis
Light Reading
8/11/2000

A day after Mitel Corp. (NYSE: MLT) announced what it deemed a "breakthrough" in optic components, skeptics greeted the plan with a "show us the money" message.

Mitel on Thursday announced a silicon-based component called an Echelle Grating that company officials say will enable higher-density multiplexing of wavelengths used in dense wavelength-divison multiplexing (DWDM) equipment.

Peter Burke, vice president of strategic marketing at Mitel, said the chip will be targeted at the metropolitan DWDM market, where growth in the number of fiber-optic connections will require higher-density multiplexing components. He claims the Echelle Grating "is more amenable to high capacity" than other fiber optic components such as arrayed waveguide gratings and fiber Bragg gratings.

The components will enable equipment vendors to carry 40- or 80-channel DWDM technology in a footprint significantly smaller than other methods, according to Mitel officials.

But observers noted that Mitel's component is still far from being turned into a product. In fact, the press release makes no mention of a release date. The manufacturing of components, not the design, is the most difficult task in the business. Mitel has built a prototype of its Echelle Grating, but it has not manufactured the chip in volume.

According to Burke, the manufacturing will be done at Mitel's facility in Bromont, Quebec. The facility has a silicon fabrication capacity of 88,000 6-inch wafers and 170,000 4-inch wafers per year.

"I'd file this the way I filed the Agilent Technologies [NYSE: A] bubble technology announcement," said Max Schuetz, optical networking analyst at Thomas Weisel Partners. "It's good for the stock price, but let's talk again when they have a product. Manufacturing these things is difficult, and packaging them is even more difficult. It took people like PIRI [Photonic Integration Research Inc.] and SDL a lot longer to manufacture some of their products than they thought it would." (SDL Corp. [Nasdaq: SDLI] acquired PIRI earlier this year.)

Schuetz said that one of the complications in packaging the products is high sensitivity to temperature.

Others concurred. "It really wasn't a product announcement, it was a technology announcement," said Cliff Hirsch, editor and publisher of Semiconductor Times. "Even though it sounds good, it's a matter of when they can develop a product."

As of late Friday, Mitel shares were trading down $3.69 to $20.31 for the day.

-- R. Scott Raynovich, executive editor, Light Reading http://www.lightreading.com

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