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Optical components

NeoPhotonics Makes a 100G Move

News Analysis Craig Matsumoto, Editor-in-Chief, Light Reading 9/29/2011

NeoPhotonics Corp. (NYSE: NPTN) announced Thursday that it's planning to acquire privately held optical components vendor Santur Corp.

NeoPhotonics is offering about US$39.2 million plus possibly another $7.5 million contingent on Santur's performance. Santur's revenues were $21 million for the six months ending June 30, according to NeoPhotonics.

The deal is expected to close by year's end.

Why this matters
Suppliers are gearing up for the 100Gbit/s product cycle, and NeoPhotonics is no exception. The deal would give NeoPhotonics, which stakes its name on photonic integration, some 100Gbit/s-related indium phosphide (InP) piece-parts to integrate.

It also gives NeoPhotonics an easy way into the 10x10 multisource agreement (MSA). Santur was an early champion of the transceiver format, which is an alternative to telecom's 100Gbit/s standards and has the backing of some big customers including Brocade Communications Systems Inc. (Nasdaq: BRCD) and Google (Nasdaq: GOOG).

Santur also has coherent 100Gbit/s optics, according to the NeoPhotonics press release.

Separately: So much for that IPO -- Santur's, that is. The company strove to go public years ago but couldn't get it done. While $46.7 million is nothing to sneeze at, Santur raised at least $108 million in its 12-year lifetime, by Light Reading's count.

For more
Here's a bit more on 100Gbit/s and Santur's road to an exit.

— Craig Matsumoto, West Coast Editor, Light Reading

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^Eagle^ 12/5/2012 | 4:52:19 PM

re: NeoPhotonics Makes a 100G Move

Craig,

while I understand the motivation for Neophotonics to buy Santur, I question the statement about Santur having coherent technology.

Can you did into this and get back to us readers?

I think Neo buying Santur is good for NeoPhotonics on many levels.  10x10, tunable laser, 10Gig MZI, etc.

Just have not seen any press about coherent technology from Santur.  To my knowledge they don't have such, but they could have some development that has not been announced.  However, it would have to be either detectors that are useful for NeoPhotonics front end for coherent detection, or it would have to be high speed MZI's for the modulation.  To my knowledge, Santur's MZI is great for 10G, but has limited bandwidth and struggles for the speeds needed for 100Gig (100Gig PM-DQPSK needs about 4 x 30Gig to make it work).

so, some additional digging and reporting on this would be most helpful.  

Note: I would be happy if Santur really has such as I am a Neophotonics stock holder and I think it would be good for my stock value.  But I kind of doubt it unless it is the detectors.  As you know, this is an area where I have some expertise.

Also, I sure hope Neo can make a good go of the Santur tunable.  As you know, Neo has purchased at least 2 tunable laser suppliers in the past and nothing came of it.   Bandwidth 9 and Paxera.  

Finally, it would be really interesting to know the mix of revenue from santur's products: how much from tunable vs how much from 10x10.  I think the 10x10 revenue is larger of the two these days.  But that is just a guess based on general market knowledge.  I have zero insider information.

sailboat

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^Eagle^ 12/5/2012 | 4:52:18 PM

re: NeoPhotonics Makes a 100G Move

Craig,

Also quite curious to know if the deal was for Neophotonics stock? or was it cash?  Maybe I missed it, but the press release was not clear on this.

inquiring minds want to know.

sailboat

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^Eagle^ 12/5/2012 | 4:52:18 PM

re: NeoPhotonics Makes a 100G Move

Ooops, meant to say "dig" into it.  Not did.

sorry

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Camil_mat 12/5/2012 | 4:52:16 PM

re: NeoPhotonics Makes a 100G Move

Sailboat

It is a little known fact that Santur has shipped about 10K ports of NLW ITLAs for 40G and 100G coherent applications. You could see it in some of the reports from Infonetics, etc. 

 

Camil

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^Eagle^ 12/5/2012 | 4:52:15 PM

re: NeoPhotonics Makes a 100G Move

Camil,

NLW ITLA's are clear.  Very cool that they are in the source side with the narrow linewidth tunables.  I suppose you could state that these source lasers are the "coherent" play that is mentioned.

I was actually hoping to find out the development had gone further than the NLW ITLA and there was either new detectors out of Santur's EPI or higher bandwidth MZI's or both.  This would indicate keeping the EPI / FAB fuller with production parts and the cost spread over more devices.  As well as addressing a deeper and wider market.  Since neophotonics does not make their own dectectors a detector play out of Santur would compliment Neo's efforts on the 100gig coherent receiver they support with their PLC platform.  By having detectors in house for the 100Gig line side applications would both reduce Neo's cost as well as give them control of their own destiny on the RX side.  And, as mentioned, fill up the fab which is a fixed cost that must be amortized. 

That would be cool and give me some more reason to be happy with the purchase.  I bought several companies stocks in the component space at or near their recent bottoms.  Neophotonics is one of them.  So always looking for good news.  

Thanks for reminding me of the narrow line width lasers.  I had forgotten about those.

sailboat

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^Eagle^ 12/5/2012 | 4:52:13 PM

re: NeoPhotonics Makes a 100G Move

All cash, wow.  Of course that raises all kinds of other questions.  Sounds pretty clear that the investors into Santur did not want to take stock in Neo and hope that the stock rises.  Considering the stock is at a pretty low point, there should be good upside for them if they took stock.  Wonder if the all cash deal implies anything about the seller's belief in future upsides to Neo shares.  Or it is only that the investors were desperate for cash and did not want to wait any longer.

Also on another note, I have heard from several very reliabie sources that a few years ago, Santur was offered quite a bit more for the company than Neo paid.  I heard there were offers by more than one buyer and the offers were more than 2x or even more than 3x what Neo paid, but the Santur board turned them down in the belief that they could do better down the road.  Not long after those offers there was a big exodus of key executives and high level staff.

reminds me of the old saying: "a bird in the hand is worth two in the bush"....

So many boards in silicon valley have made this same mistake, turning down substantial offers that would put some money into the hands of the rank and file employees who actually built the companies and products based on the belief that their companies were worth huge amounts more... only to later sell at significant discounts after they run out of gas and the selling price is then so low that all the funds go to preferred shareholders with relatively little left over for common share holders and employees.  

Kind of sad how many VC's make this same mistake again and again and again.  And supposedly the VC community is comprised of the smartest among us.  

Wonder how much of this purchase of Santur will actually go to employees  as opposed to the preferreds.  (and how much of the employee pool went to rank and file working engineers as oppsed to exectuive team) bet the workers got almost nothing for their years of efforts.  Sheesh.

sailboat

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Pete Baldwin 12/5/2012 | 4:52:13 PM

re: NeoPhotonics Makes a 100G Move

Sorry Sailboat - didn't catch this comment yesterday. The deal's all cash.

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