No Go for Yafo?

The holiday cheer is likely to be thin on the ground at Yafo Networks this year.

According to Light Reading sources, the startup, which is working on 40-Gbit/s technology, recently laid off half its staff, failed in its attempts to win further funding, and has seen a major customer contract slashed back to a nubbin.

What a difference a year makes. Twelve months ago, 40-Gbit/s kit promised to be one of the hottest technologies going. But then the optical networking bubble burst. Carriers began thinking more about how to make money from existing infrastructure and less about building more network capacity -- and 40-Gbit/s got sidelined.

Yafo Networks is now feeling the effect of that shift in priorities, sources say. The company, which was founded in 1999, is building a turnkey solution to tackle the problem of polarization mode dispersion (PMD) on ultra high-speed networks (see Can Yafo Lift Speed Limits?).

“The problem is their market,” says Doug Green, vice president of marketing for Ocular Networks Inc., a startup that was recently acquired by Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA). “PMD is a problem that is an annoyance in current networks, but promises to be a real big issue with 40G systems. Henry [Yaffe] and Frank [Moody] saw this as an opportunity as everyone was hyping the fact that 40G was ‘right around the corner.’ However, nobody plans on deploying 40G any time soon -- hence, no market for their product.”

Yaffe, one of the founders of Yafo and CTO of the company, admitted back in July during a panel discussion at NFOEC that the uptake to 40 Gbit/s would take longer than he and others in the industry had expected (see 40 Gbit/s Takes the Slow Lane).

Last month, the company quietly laid off a large portion of its staff. The exact number is still under wraps, but some former employees who contacted Light Reading say that it was close to 50 percent of the 100 person staff. Jeff Ferry, spokesman for the startup, would not comment on the number of employees that were let go, but he said that cuts were made across the board.

“Like other startups that have been through this, we cut the usual amount,” says Ferry. “We had to make these cuts because the industry as a whole is so depressed, but we are totally convinced that there is a strong market for PMD compensation. And in a year, you’ll see how right I am.”

A recently laid-off employee, who requested anonymity, says Yafo also suffered when WorldCom Inc. (Nasdaq: WCOM) decided in October to pare back an order for 1,000 Yafo-10s, Yafo's first product, to fifty units over the course of 2002.

Ferry denies that the company has had difficulties finding customers interested in the technology. “We are seeing some encouraging signs of renewed growth in our market,” he says.

Meantime, word from the venture capital circuit is that the company is struggling to raise a third round of funding. In two previous rounds, the company had raised a total of $40 million. But it hasn’t had a round since April of 2000, and some say it is in desperate need of cash.

“They came through here looking for cash some time ago,” says one venture capitalist, who didn’t want his name used. “Good guys, but there was the obvious market problem.”

Yafo isn’t the only company focused on this market. Phaethon Communications and General Photonics Inc. are developing similar products. Phaethon has raised about $30 million in funding. General Photonics is still in the early stages of development. Back in June it raised $5 million, but its CTO says that it's already generating revenue (see General Photonics Is in the Money ).

— Marguerite Reardon, Senior Editor, Light Reading
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kokoro 12/4/2012 | 11:05:48 PM
re: No Go for Yafo? I can't understand the chorus against tomorrow.

I'd be curious to know what you anticipated for 10 Gb/s market not many years ago.
We'll need tunability, we'll need PMD compensation and more than this. We'll need 40 Gb/s and more than this.
The only question that makes sense is probably when. I've no answer today.
And you?
Please let me also know if you have a web site for your crystal ball...

temporary 12/4/2012 | 11:04:32 PM
re: No Go for Yafo? I am a little confused about the need for bigger pipes.
Bigger pipes mean lower latency and fewer switches, but it isn't there a law of dimishing returns here?
endof tunnel 12/4/2012 | 11:04:31 PM
re: No Go for Yafo? Nortel did a survey on PMD from fiber plants of 12 customers (publioshed at last NFOEC) and said good fibers after 1994 don't need to compensate PMD even for 40G. Many companies now believe that PMD compensation will not be needed for the 1st gen 40G networks. For the 2nd gen networks, people will pay some money for PMDC, but the amount per channel may be less or comparable to that for chromatic dispersion compensation. The 2nd gen may what the Santel is after. The 3rd will be the optical compensation but it will be years away and the cost will be manageable.

However, for 40G network of even the 1st gen. tunable chromatic dispersion is needed to at least level the temperature effect. Fiber in groud will experience 20 to 30 C change from different seasons. Such a temperature change will be to be compensated since the 40G data is so sensitive to mismatch of dispersion.

For 10G signals, tunable dispersion compensation will also be needed for both metro and ULH. Only LH will not need tunability. For metro, the needs will arrive when switching is here to compensate length difference before and after switching. For ULH, it is for compensating the temperature effect and dispersion slope effect after 3000 km. For standstard LH (500 to 2000 km), dispersion compensating fiber without any tunability will be sufficient.
HarveyMudd 12/4/2012 | 7:23:17 PM
re: No Go for Yafo? The death of Yaho was expected because of the fast decline of the optical networking industry. There is not much need for the opical networking companies. The company's product is not very attractive,
Litewave 12/4/2012 | 7:23:16 PM
re: No Go for Yafo? Author: HarveyMudd
...optical networking industry. There is not much need for the opical networking companies.

You're right Harvey, theres not much need at all for the opical networking companies.

I just wish I knew what opical was.

ps: sorry folks, I couldn't resist. Merry Christmas, hope you have a laugh or two as well
lightfax 12/4/2012 | 7:23:13 PM
re: No Go for Yafo? Has anybody heard what is happening at Santel Networks? How are they doing? What about Pheathon?

It seems that "TUNABLE" dispersion compensation solution (chromatic and PMD) market is dead after the collapse of Yafo. No one needs "TUNABILITY" it appears. Its very sad.

Oakster 12/4/2012 | 7:23:11 PM
re: No Go for Yafo? ...like a fish needs a bicycle.
BB 12/4/2012 | 7:23:10 PM
re: No Go for Yafo? i interviewed with yafo some time ago...ppl there had attitude without anything to back it up...

their work can be done by a team of twenty...grad students...

but then again their attitude is from the "good old days"...

yafo should change their name to dodo...

btw...got an offer from them but turned it down on...so no sour grapes here...
bigdaddy 12/4/2012 | 7:23:10 PM
re: No Go for Yafo? I heard that Santel is hiring some fine individuals. Both companies are late 2002 to 2003 contenders from the start. Everyone wants revenue, but, when you are making a fix everything tunable solution you plan for the long run.

Stop with the "chicken little" impression already! Saying "No one needs TUNABILITY it appears" is like saying DeLorean failed so - no one needs CARS!

Everyone needs tunability! Everyone wants tunability. The trick is it has to be small and cheap. Single channel solutions are not likely to be either real soon. But then PMD compensation isn't practical unless it's done on a single channel.

or is it???

Talk 12/4/2012 | 7:23:07 PM
re: No Go for Yafo? Most top guy left. Yes, their work can be done by a team of twenty...grad students...

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