Light Peak Puffs Up Enablence
Enablence reported on Wednesday that its photodiodes have been chosen for use in Intel's Light Peak modules -- the 10-Gbit/s optical interconnect for PCs. Light Peak is intended to be a universal replacement for USB, Firewire, and other interconnects.
Here's the interesting part. Analyst Daniel Kim of Paradigm Capital Inc. , one of the firms that underwrote Enablence's IPO, wrote in a report issued today that Enablence's "contribution to Light Peak will amount to approximately $10-12 per PC."
Enablence's shares had already risen about 26 percent the day after the Intel announcement. But today, possibly on the strength of Kim's report, Enablence climbed another 18 cents (55 percent) to 51 cents per share. That's a 96 percent gain in two days.
But is $10 to $12 per PC realistic? Light Reading ran that figure past some experts and got the phone equivalent of a funny look.
"I don't know about anything double digits" inside a Light Peak module, says Richard Doherty, an analyst with The Envisioneering Group and a longtime follower of Intel. "These speeds don't require one-photon sensitivity photodiodes, or the kind of x-ray photodiodes NASA uses."
One source familiar with optical components pricing puts photodetectors, even 10-Gbit/s ones, at between 50 cents and $1. "And if you're going to see volume, the price is going to come down."
Neither source thinks Intel needs a high-end photodetector for Light Peak. Moreover, if it's a commodity photodetector that Enablence is providing, then the company is likely to face long-term competition from bigger, higher-volume competitors.
Intel wouldn't comment when asked about the likely price of a Light Peak module, but given that it's meant for PCs, it can't be very high. Or, to put it another way: If Enablence's piece alone is going to cost Intel $10, that bodes ill for the total cost of Light Peak.
"I think their goal was to be in the low tens of dollars and to have that drop over time. USB 1.0 started in the low tens of dollars," Doherty says.
Even 50 cents per PC could be a good haul for Enablence. Kim estimates 112 million desktop PCs will get sold in 2010 -- based on the 337 million total PCs that Gartner expects will ship. But not every PC is built with Intel inside (blasphemy, we know) and it's probable that not every PC will have Light Peak. Moreover, Light Peak, which hasn't begun shipping, won't reach real volumes until 2011.
Given all the question marks, Kim's report doesn't give a specific estimate for how much the Intel deal is worth to Enablence. He didn't change his forecast, which calls for Enablence to see revenues of $45.2 million this year, $64.9 million in 2010, and $104 million in 2011.
Enablence officials and Kim couldn't immediately be reached for comment.
— Craig Matsumoto, West Coast Editor, Light Reading