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Optical components

Optical Future

6:00 PM -- Daryl Inniss, an analyst with Ovum RHK Inc. , brings up a good point about the optical components business:

"The model in this market is still unclear. Who are the success stories? Who do I want to be when I grow up? No one seems to know," he says.

Optical's problems are the same as they were two years ago: too many companies. Most executives openly acknowledge this. Photonics suppliers don't have much sway, as shown by the way Cisco Systems Inc. (Nasdaq: CSCO)'s "lean manufacturing" initiative dented everyone's quarterlies. Amazing to see folks like u2t Photonics AG still surviving.

So, who's going to break through all this and become the optical role model? JDSU (Nasdaq: JDSU; Toronto: JDU) doesn't seem to want to do it. (See JDSU May Be Mulling Optical Exit.) Opnext Inc. (Nasdaq: OPXT) might be the answer for now, but there's no guarantee that will last.

A greenfield startup approach might be more likely to break through. Not to pressure anyone, but I'm kind of eyeing NeoPhotonics Corp. (NYSE: NPTN) along those lines.

— Craig Matsumoto, West Coast Editor, Light Reading

deauxfaux 12/5/2012 | 3:01:50 PM
re: Optical Future Back when Photon was part of Ortel it made money too.

I saw Tim make a presentation last year some time in which he stated that he would be profitable in '08. So we'll have to see

Oak is a very committed investor and have clearly decided to back Neophotonics to be one of the last guys standing: that is critical, because the public guys aren't doing so well to say the least
Pete Baldwin 12/5/2012 | 3:01:50 PM
re: Optical Future Well, I didn't say they were there *now*. :) I'll concede that the name change and the Lightwave Micro history make for an eyebrow-raising history. But I like that Photon is actually making money, and that Neo is going after some breadth. Equipment vendors like breadth -- witness Cisco's attempts to cut down on suppliers -- but the big components companies got there by buying large operations that came with too much baggage. Maybe someone like Neo can assemble respectable breadth in a more manageable package.

Is it possible Neo is falling into the same trap and will end up biting more than it can chew? Sure.

Here's a crazier thought: Most people seem to be assuming it's a matter of time and patience before some of the business models pan out ... but if you want to think more radically, it's possible the entire industry is going at this the wrong way. There's a nice depressing thought for the weekend.
UberNeoCon 12/5/2012 | 3:01:50 PM
re: Optical Future This is the one that confuses me the most. First they were NanoGram, with some sort of laser reactive deposition (flame hydrolysis with a laser) where god knows how many dollars went. Then somehow Lightwave Micro (which chewed through $150M and was going Chapter 7) was bolted on, along with Shenzhen Photon which Oak funded, and now some other startups.

As near as I can tell, Photon breaks even, and everything else loses money.
olsen 12/5/2012 | 3:01:50 PM
re: Optical Future I'm pretty sure Ignis Photonyx want's a shot at the title.
Pete Baldwin 12/5/2012 | 3:01:50 PM
re: Optical Future Good one. They're not really up there in terms of breadth -- but then again, if we're talking about what the best model ends up being, it's possible breadth isn't the way to go (see next comment).
DarkWriting 12/5/2012 | 3:01:49 PM
re: Optical Future I see two options:

1. Oligopoly/Monopoly because customers will always need product. This will most likely be the company(s) with the strongest offshore manufacturing capacity and not using a contract manufacturer.

2. If there is no money to be made, the big system vendors will effectively bring it in house. That would be a good way to kill off a few smaller competitors as well. There are a lot of functions in these products (transceivers) that could easily be incorporated into board level electronics and only have the optics as a pluggable part for example.

DW
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