Now everything has gone into reverse, Lizzie Grubman-style. The IPO filing has been withdrawn. The company has been shedding staff. And today, OMM announced that it’s discontinuing its 3D MEMS development and laying off another 100 employees (see OMM 86s 3D MEMS). Its workforce now totals 220, down from 400 at the beginning of the year.
OMM is putting a brave face on it, pointing out that its smaller 2D MEMS subsystems are still the only ones to have passed grueling environmental and reliability tests (see OMM Gets a Breather) and that these have been shipped to no fewer than 28 customers.
As for bigger 3D subsystems, “the market’s much further out than we thought –- maybe two or three years away”, says Conrad Burke, OMM’s senior VP of marketing and business development. He says this only dawned on OMM recently (an epiphany, like).
The real problem for OMM, and for all the other startups developing optical switching subsystems, is that it’s almost impossible to say when the market for any of their products will take off. And that applies not only to 3D subsystems, which are seriously challenging to develop, but also to the much simpler 2D subsystems of which OMM is so proud.
The big problem is that subsystem manufacturers like OMM are at the other end of the food chain from the folk that actually determine market requirements -– the service providers and their customers.
OMM has managed to sell a relatively small number of their 2D boxes to 28 system manufacturers, so they can integrate OMM’s boxes into their prototype kits. After that, the system manufacturers have to persuade carriers to evaluate their prototypes in their labs and conduct field trials before they stand a chance of getting a multimillion-dollar contract. Then, and only then, is OMM likely to receive any significantly sized orders (see Components, Anyone?).
In OMM’s case, Burke says that three of its 28 customers have got their switches into carrier trials, although he can’t tell whether that’s lab trials or field trials.
One of those customers, by the way, is Ilotron, the U.K. startup that got into financial trouble earlier this year. Most of Ilotron’s assets were acquired by Altamar Networks (see Altamar Buys a Bargain), and Altamar isn’t planning to continue development of Ilotron’s switch, according to Ian Wright, its senior VP of engineering and CTO.
In other words, only two of OMM’s customers are anywhere close to selling their switches to carriers, and they may not be that close if they haven’t actually started field trials.
OMM’s efforts at reducing staff levels are clearly aimed at containing costs while the agonizing wait for a big order for its 2D subsystems continues. Burke says OMM has enough cash to continue “quite well on into 2002.” The big question is whether that will be long enough.
When it comes to the large 3D subsystems, Burke says OMM made three 64x64 prototypes, but they remained ensconced in the labs.
Corning Inc. (NYSE: GLW) is widely credited with shipping the first 3D subsystems. Ciena Corp. (Nasdaq: CIEN) and Tellium Inc. (Nasdaq: TELM) both demonstrated switches incorporating Corning 256x256 port 3D MEMS modules at the Supercomm and NFOEC trade shows. Corning's "relationships with customers and potential customers continue unchanged," says Mark Newhouse, general manager of Corning's optical networking devices division, in an email to Light Reading.
A bunch of other startups are planning to ship 3D subsystems by the end of the year. One of them is Integrated Micromachines Inc. (IMMI), which plans to ship a 36x36-port prototype in October followed by a 256x256-port beta version early next year. “Our customers are beating down the door” says Steve Walker, IMMI’s 3D program manager. He says “more than several” system vendors are designing IMMI’s 3D subsystem into their equipment.
Another startup, Onix Microsytems Inc., plans to ship commercial 3D systems “some time next year” according to Meng-Hsiung Kiang, its founder and director of business development.
Of course, startups like IMMI and Onix may have equipment manufacturers beating down their doors to get early access to the latest developments in 3D subsystems, but that doesn’t mean that these equipment manufacturers have got carriers beating down their doors for monster optical crossconnects.
If OMM is in trouble getting big orders for relatively simple 2D MEMS subsystems, the chances are that the likes of IMMI and Onix will face an even longer wait for big orders for their 3D MEMS subsystems.
— Peter Heywood, Founding Editor, Light Reading
http://www.lightreading.com Want to know more? The big cheeses of the optical networking industry will be discussing this very topic in a session at Opticon 2001, Light Reading’s annual conference, being held in San Jose, California, August 13-16. Check it out at Opticon2001.