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Optical components

WaveSplutter?

Back in October, there was an exodus of top-level executives from WaveSplitter Technologies Inc., which left many in the industry questioning the company's fate.

WaveSplitter's president and CEO Bill Diamond, its CFO Bruce Pollock, and its VP of operations and engineering Ralph Ahlgren all departed the company at around the same time (see Headcount: Shopping, Lifting, Moving On). Their names were removed from the company's Website, which now lists only two members of senior management -- founder Sheau Sheng Chen, who is the new president and CEO; and a VP of sales and marketing, Steve Tsui.

Sources suggest that the executive cleanout was only the tip of the iceberg, with significant numbers of employees affected by layoffs. WaveSplitter's spokespeople declined to elaborate, and most folk jumped to the conclusion that the company was on its last legs -- which turns out to be not far from the truth.

Last week, former president and CEO Diamond resurfaced at another company -- Singapore-based DenseLight Semiconductors Pte. Ltd. (see DenseLight Appoints CEO). He talked to Light Reading about his reasons for leaving WaveSplitter and for taking his chances at another optical startup.

Not unexpectedly, Diamond says that WaveSplitter had been hit "very hard" by the telecom downturn. Its original area of business was in fused-fiber components, such as couplers and combiners, which are mostly used to build Erbium Doped-Fiber Amplifiers (EDFAs) for long-haul markets. Later on, it developed a second line of business in Arrayed Waveguide Gratings (AWGs) and related components, which are geared towards high-capacity, high-channel count systems (see WaveSplitter Gets Dynamic Over DWDM).

"All the technology the company produced is centered around the long-haul, and that's been the most devastated area," he notes. "We had good products, good technology, just no demand for them."

WaveSplitter grew rapidly during the optical bubble years, investing in people and facilities that it no longer has a need for. As a result, it has been forced to cut back severely on both, according to Diamond.

"Now is not the time to spend money on people. We decided we could do without a sophisticated CFO, a sophisticated CEO, and cut right back on engineering. It was almost a hibernation strategy, as we stripped right down to the bare bones."

On the operational side, WaveSplitter's strategy hinges on moving most of its manufacturing over to Taiwan. The investments it made to expand operations, particularly in planar waveguide fabrication, were proving to be a huge financial drain on the company. The company hopes that the more favorable cost structure of a Taiwanese operation, coupled with local government backing, should help improve its prospects.

The move to Taiwan was clearly a factor in Diamond's departure. WaveSplitter's founder, Sheau Sheng Chen, is Taiwanese and "is better positioned to see the company through the next phase," Diamond says. Other reasons for picking Taiwan include the fact that one of the banks associated with the company's line of credit is Taiwanese, and it already has a contract manufacturing partner in the Far East.

WaveSplitter will still be headquartered in the U.S., where it continues to act as a sales channel for active components from NEC Corp. (Nasdaq: NIPNY). In fact, Diamond suggests that WaveSplitter is probably making more revenues as a reseller for NEC than it is from selling its own products right now.

All this is a far cry from two years ago, when WaveSplitter was all set for a monster IPO that would have raised $155 million (see Wavesplitter Files for $155 Million IPO). Now its future looks uncertain. Only time will tell if the company can sucessfully pull off the rescue plan.

But what of Diamond's new gig, DenseLight Semiconductors? At first glance, it appears to be everything that WaveSplitter is not.

Founded in May 2000, by a group of professors from Singapore's Nanyang Technological University (NTU), DenseLight is building a range of active components, including lasers for DWDM, CWDM, pump laser arrays, and superluminescent LEDs (see DenseLight Goes to the Quantum Well). Plus point one, in Diamond's view, is that the market for active components is in a lot better shape than the market for passives -- WaveSplitter's speciality.

Plus point two is DenseLight's location. Based, as it is, in Singapore, it is already taking advantage of a cost structure that is one third to one half that of a similar operation in Europe or the U.S., according to Diamond. It is also in a better position to access the Asian market, which is seeing more action than elsewhere.

Plus point three is the company's status as a newcomer. For starters, it didn't waste resources ramping up to volumes that would quickly go away. In addition, being new it has totally state-of-the-art tools and processes that "put it in a position to compete with companies that have been doing this for a much longer time."

So far, DenseLight has only been shipping samples, and has no volume purchase agreements in place, but it expects that to change next year. The startup claims to be engaged with over 40 customers already, even though it hasn't started actively marketing its products yet. "If it can do all this without trying, it will be fun to see what we can do when we do try," Diamond quips.

— Pauline Rigby, Senior Editor, Light Reading
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ntuprof 12/5/2012 | 12:30:26 AM
re: WaveSplutter? In reply to realoptics

1. At least two of the academics setting up DL resigned. Thus they did quit, although the exact reasons for that are not clear.
2. The research at NTU, in collaboration with a Canadian University, provided some excellent results, although repeatability and reliability issues are extremely questionable.
3. The guys really behind the QWI technologies DL use did not join the company, in disgust at the former NTU Prof's management, and the fact the technology is not readily manufacturable.
4. The founders of the company abused a collaborative research program between NTU and the Canadian university to exploit joint results solely for their own commercial gain.
5. The experts/founders at the company only took part in the NTU research in name. They have limited technical skills in the realisation of the ideas.
6. The technology they use infringes NRC's QWI patent. The IP of DL is weak, at best.
7. NTU does have a few areas of considerable expertise and ability. There are some areas of research that are really first tier. This is not true across the board, however. Most, unfortunately is presentational gloss, something which DL excel at.
denselight_staff 12/5/2012 | 12:09:45 AM
re: WaveSplutter? (1) within 2.5 years, 4 NTU ex-prof have wasted all 30m us$. now they relay on government funding, which only can last 2-3 month (every injection).

(2) ex-prof's wild idea of QWI, OCM and other......all useless, all stop.......

(3) what they are selling - SLED, ex-prof were strongly against this product initially, but for money, they have to do now.

(4) ex-prof filed many patents, most of them have been approved wrong, new CEO has concluded - wasting money only.
Opinionated Crank 12/4/2012 | 9:12:05 PM
re: WaveSplutter? WaveSplitter had several distinct eras in its brief history. They can be summarized as follows.

The Stone Age. A predominantly Chinese company making fused fiber products, originally called Applied Fiber Optics. Meetings were held in Mandarin. Sheau Chen becomes CEO.

The Lucent Age. Jerry Bautista and his merry band of waveguide technologists leave Lucent and join WaveSplitter. Jerry becomes CTO, brings his protege Kevin Sullivan in as a VP, and all the rest of the Lucent team remains in Atlanta which becomes a WaveSplitter site. The product roadmap shifts from fiber products to waveguide products. WaveProcessor named a New Product of the Year at Photonics West.

The E-Tek Age. Bill Diamond brought in from E-Tek as CEO, glowing rosily from the E-Tek IPO, with a charter to lead the WaveSplitter IPO. He brings on more senior managers from E-Tek, including his own protege as a redundant director of marketing, and another guy as a redundant VP of engineering. Multiple senior managers jump on the bandwagon from outside, company ramps hiring to a frantic extent. Soon there are more than 300 employees. Amazingly, at no point in the company's history is anyone ever promoted to senior management. Every single senior manager comes from outside, so that none of the decision makers have ever worked on a WaveSplitter project. This disconnect from what actually goes on at working level grows into a serious problem.

The Survivor Age. Orders suddenly cease, IPO retracted, top-heavy organizational structure micromanages development, strangling it. Periodic layoffs begin. Like Survivor, the wrong people are often voted off the island. Senior managers and marketing personel seem to have been given permanent immunity. Finger pointing begins. Marketing types, including CEO, decide to blame technical people. CTO marginalized, his protege gets squeezed out, he quits. Soon, the senior management team consists primarily of marketing dudes. Amazingly, and laughably, they conclude that what WaveSplitter does best is...marketing. While every other startup in this situation hibernates by furloughing sales and marketing and keeping development going so that there will be products when the customers come back, WaveSplitter cans all its technologists and clings to life as NEC's US sales rep. A middleman, in other words. Investors apparently not impressed by this strategy. Without more funding, bloated senior management team finally experiences long overdue purge as reported in Light Reading.

The Stone Age. Company reverts to primarily Chinese company managed by Sheau Chen. Doomed.

It's a shame, because WaveSplitter had the talent to do the job. But the critical mass of unnecessary senior managers brought in to make the IPO cosmetically better "didn't know the territory" and sent the company pendulum way too far on the marketing side of the engineering-marketing spectrum. We've all seen startups fail by being too far on the other side--a bunch of engineers who make something cool without understanding whether anyone wants to buy it. WaveSplitter is a rarer case of the opposite: too much high-frequency manipulation of product development by people who aren't technically good enough to know what they are doing. Every time they talked to a customer, the road map would change. These changes occurred with a time constant far shorter than the time to develop a product. The deck chair rearranging became so frantic that people targeted for layoff one day were suddenly made into managers of brand-new projects the next day on the basis of one conversation with a customer. The huge glut of senior managers delegated all deliverables to project managers, but no budget or head count. When project development ground to a halt, the CEO called in all the project managers (about a dozen) and explained how the problem must be all their individual failures, rather than the way he was running the company, with a huge crowd of highly empowered senior managers making all decisions without benefit of any intimate knowledge of the ongoing work, and a bunch of completely unempowered engineers with no resources being told to develop a ridiculously large array of products. Aristotle was right; moderation in everything should be the goal. Not too much domination of decision-making by engineers; not too much by marketing either.
Peter Heywood 12/4/2012 | 9:12:03 PM
re: WaveSplutter? What a great post!!!!!
gea 12/4/2012 | 9:12:00 PM
re: WaveSplutter? I agree, an excellent post.

One thing I think is becomming obvious is that, for any company dealing with real technology, business 'managers' are absolutely going to have to be very tech-savvy.

Likewise, the next batch of engineers are going to have to be a lot more business- and marketing-aware.

I'd take that a step further to say that in the successful tech companies of the future, there will be no clear dividing line between managers and managees, technical and nontechnical. This is what I'm already seeing in my post-telecom financial career.
LightBeating 12/4/2012 | 9:11:59 PM
re: WaveSplutter? Gea, and others,

I tend to disagree. Talk about finger pointing! That is a classic example. Sure there were too many managers (ah! those marketing guys who always want to SELL something!). But weren't there also too many engineers, too many technicians, hell, too many secretaries! Wasn't that the model of each and every company during the bubble?

It's said that they had all the engineering talent. To do what? Fused couplers? AWG's? What's so fantastic about those products, I mean, everybody else was making AWG's, and as for fused couplers, well, talk about a mature technology!

Now, they've understood that there's no future in expensive fancy passive components. It's a business model that only worked for a few months when everybody could pay with phony money. The best business model is: just have them made for really cheap in Taiwan or China.

And what's so wrong about reselling NEC's products, if it brings in revenues?

Come on, let's get real! If Wavesplitter survives the down market, it will be a major business accomplishment. The old model would never have worked, and it's not just the fault of the marketing guys and the senior managers.

LB
wayland_smithy 12/4/2012 | 9:11:59 PM
re: WaveSplutter? Sounds like the experiment initiated by the mice in Douglas Adams' "Hitchhiker's Guide to the Galaxy".
Sad thing is, this is not just a startup problem (although tihs is more prevolent in startups than you may think) - I've seen this happen in many of the business units of larger organisations as well (one in particular springs to mind, eh !).
jacket757 12/4/2012 | 9:11:58 PM
re: WaveSplutter? In the Denselight PR, Diamond touted his role of bringing Matsushita in as a partner for Wavesplitter. Did they outsource manufacturing to Taiwan or to Matsushita in Japan?

Supposedly Matsushita is trying to break into the optical business as a CM. Has anyone heard of them in this business?
Mad Max 12/4/2012 | 9:11:58 PM
re: WaveSplutter? Wow, that's some baggage unloaded. But all very accurate. At the risk of piling on, some additional points: The obvious and acknowledged conflict within the top leadership team was pathetic at best and criminal at worst. Each Executive trying to subvert and out swagger the next.... and that was in the good times. Once the trouble hit it was ass covering and ego damage control all the way. The conflict was factionalized: Lucent vs. non-Lucent, American vs. Chinese, "original" WaveSplitter vs. "new" WaveSplitter and ultimately Sales/Marketing vs. Engineering. In a fair world, these guys would be exposed for their dismal performance. But of course (like Lucent, NORTELGǪ..), they will (have) convinced themselves and others that it was everything but their own ineptitude, and especially the great out... the historic "market decline". Right!

All said and done, the undoing was the result of the lack of respect and trust S/M showed in R&D.... which was not altogether unearned. Engineering dropped the ball many times, but then again, they operated with jello-like product roadmaps reflecting no market vision and a "customer of the day" approach (I guess it worked at E-Tek and New Focus). In a healthy company, the top brass would step in and set things straight..... But then again, it was the top bass that was fighting. Time for bed children!!


ohjustshutup 12/4/2012 | 9:11:49 PM
re: WaveSplutter? Sometimes it is very unfortunate to see ex-employees, current employees, and even CEOs releave themselves in an open forum.
Yes, the fiber market went down as fast as it went up.
Yes, many were scared by this experience.
Yes, we are all adults.
So folks, grow up and act like adults!
Wavesplitter has every right to attempt survival. Chucking out a few good folks with some of the bad, is just the way life is. Get a life and get over it.
The bitterness that Mr. Diamond has for his last company seems evident from the article. Too bad he could not just focus on his future while his torn past (Wavesplitter) focuses on it's future.

I can not help but to think how childish it all is. I am sure that Mr. Diamond got a package from Wavesplitter. I am sure that he got a package from E-Tek. I am sure that he has a nice salary now with his new company. Mr. Diamond take your money and just shut up. I wonder what he would have done to Wavesplitter if he was not removed?
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