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Optical components

Is Xponent Xpiring?

Optical startup Xponent Photonics Inc. is giving up as an independent company and is actively searching for a buyer, Light Reading has learned.

The situation is startling, considering Xponent, which specializes in FTTx devices, announced a sizeable funding round in March. (See Xponent raises $23M.)

But that money -- some of which actually arrived in 2006 -- evaporated as Xponent underwent an aggressive Xpansion.

The results were less than Xcellent.

"What happened was a combination of us working on a big ramp, on the one hand, and very aggressive industry pricing on the other hand," says Jay Abbe, an external director and former JDSU (Nasdaq: JDSU; Toronto: JDU) president who is currently serving as Xponent's CEO.

Founding CEO Jeffrey Rittichier remains chairman of the company.

Xponent's Website was active as of Friday but now reads, "This account has been suspended."

While Xponent has slimmed down, it's still got more than 20 employees (compared with about 50 four years ago). The remaining team includes technology experts as well as sales and marketing. "We want to be able to join forces with another company as a business, not just a technology," Abbe says.

But given that Xponent's technology is still maturing, the situation after its ramp-up "led us to conclude that more resources than were available from our investment group were called for," Abbe says.

Investors include American River Ventures (Xponent's newest investor, as of March), El Dorado Ventures , Hoya Corp. , U.S. Venture Partners , and Walden International Investment Group , all of which hold seats on the company's board. Arcturus Capital and Samsung Venture Investment Corp. were also investors.

Xponent sells FTTx devices, including diplexers and triplexers. But the company's forte was its manufacturing processes.

Founded in 2000 by some ex-Ortel cohorts, Xponent was one of many companies trying to streamline optics manufacturing by avoiding active alignment, a time-consuming manual step that's needed for building transceivers and other devices. Instead, Xponent developed a more automated alternative that could use passive alignment. (See Xposing Xponent Photonics, Xponent Cuts Packaging Xpenses, and Xponent Wraps Up $18M.)

Xponent's methods also allow components to be built in packages that aren't hermetically sealed, Abbe says, and that would be another way of potentially saving costs.

— Craig Matsumoto, West Coast Editor, Light Reading


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redface 12/5/2012 | 3:02:36 PM
re: Is Xponent Xpiring? Good story, Craig.

Xponent burned about $80M, and now they will be sold for scraps. What is the reason for their misfortune? They seem to have a very strong executive and technical team. Despite Jay Abbe's claim that they don't have the resources to fully develop the technology, it looks like the technology is too problematic in addition to being not cost-competitive. Can someone shed more light on the technology and performance?
nachinnen 12/5/2012 | 3:02:32 PM
re: Is Xponent Xpiring? A few friendly clarifications:
1. Rittichier was not the founding CEO, it was Pete Sercel (CEO 1999-2000)
2. The company was founded in 1999 by 5 people: Amnon Yariv (from Ortel), Kerry Vahala (a Caltech Professor), Pete Sercel (a U of Oregon professor and Caltech PhD), Oskar Painter (a Caltech PhD student at the time), and Guido Hunziker (an ex-Lucent employee and Caltech PhD). Xponent was not founded by ex-Ortel cohorts.

Now, my thoughts:
1. If I read between the lines, Xponent ran out of money because it sold products at a price lower than its cost to produce them. The cost to ramp was not being covered by revenue. It should have concentrated on selling the products with higher ASP.
2. The technical team is very strong, evident from its ability to manufacture and ship qualified product. The technical team managed to transfer all fab, assembly, and packaging processes to contract manufacturers in the US and Asia.
3. Xponent needs a management team that has experience taking a company from early stage production to full fab-less manufacturing. There has to be a concerted effort to sell the products with the healthiest bottom line and to reduce costs at all stages of development. Revenue growth without a control on costs does not make a company successful.
4. Xponent's technology is extremely relevant because it successfully brings conventional semiconductor fabrication and assembly methods into the optics world. Xponent's SMP technology uses passive alignment, non-hermetic packaging, and standard fab tools to make its plexer products. Production is inherently cheaper.
redface 12/5/2012 | 3:02:27 PM
re: Is Xponent Xpiring? nahinnen:

Thanks for the informitive post. Now, regarding what you wrote: "4. Xponent's technology is extremely relevant because it successfully brings conventional semiconductor fabrication and assembly methods into the optics world. Xponent's SMP technology uses passive alignment, non-hermetic packaging, and standard fab tools to make its plexer products. Production is inherently cheaper." -- You seem to indicate that Xponent's technology is highly successful but the management just forgot to find a product with high ASP and did not pay attention to lower manufacturing cost. I beg to differ. I bet that they tried everything humanly possible to do both but could do no better.

Surface mount photonics supposedly should bring lower manufacturing cost which should allow them to beat the competition which is manually assembled FTTH transceivers. However, if the yield is bad or the performance is too low, it will negate or diminish the cost advantage. I think Xponent's demise probably has a lot to do with its technology, in addition to the brutal price competition in FTTH market.
tookl4wrds 12/5/2012 | 3:02:26 PM
re: Is Xponent Xpiring? Atually I agree with nahinnen (geez that't hard to write!) the issue was that they were trying to hit rev numbers to impress the board. the products with the higher ASP's did not have the demand that existed on the products they were selling. Additionally, they were over aggressive in the pricing to get in over the competition. the ramp just accelerated the losses. My guess is that their CEO figured that if he could show the board momentum he would be able to get more money out of them...WRONG.
steinarj 12/5/2012 | 3:02:19 PM
re: Is Xponent Xpiring? so, who will "grab" Xponent?

Enablence?
Balet 12/5/2012 | 3:02:01 PM
re: Is Xponent Xpiring? Jeff was an arrogant SOB....Really bad example of CEO. Big part in killing the business.
Enablence can not grab anyone, very weak S&M team will not let them succeed.

Neighboring companies are already taking really good engineers from ex-Xponent.
Diogene 12/5/2012 | 3:01:53 PM
re: Is Xponent Xpiring? MicroOptics, up to now, cannot be challenged, in my opinion, because it leverages economy of scale of machinery for TO products, and assembly lines. Actually, triplexer and diplexer BOM is mainly made of TO can and a little, low-level, already automated packaging activity.

On the contrary, while Xponent technology is for sure very nice and promising, it cannot compete on triplexer/diplexer cost structure because of all the activity and sub-assemblies are custom made for their process. Moreover is not integrated, so that your BOM is still made of several different (custom) things and manufacturing is made of several different processes.

In an ideal world, where Xponent technology were embraced by a big number of companies and economy of scale were generated, I am convinced that it would be a success story and integrated photonics would be the winning technology.

Actually, we are not in an ideal world.

For what concern the right product to be produced with SMP, you need a large volume product (i.e. triplexer, diplexer, TOSA, ROSA), otherwise fixed cost will kill your initiative. But you cannot compete with an established technology as MicroOptics. Sad but True.
Balet 12/5/2012 | 3:01:52 PM
re: Is Xponent Xpiring? I believe that integrated optics has had too much hype (especially after working for a couple of IO companies). The cost advantage is not there. It is a great technology but not for margin challenged markets, may be miniaturization driven ones, sensors?
FTTx is all about costs. People sell FTTx components and modules at 15-25% GM across the board.

Once more, poor CEOs, like Jeff, kill great engineering teams. We have all seen so much of that.
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