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Debasement of Optical Market Research

October, 2018

In 1982, as a pre-law student at NYU, I walked into the office of employment leads at the university to see what jobs would be available over the summer. A consulting company downtown, called Northern Business Information (NBI), was looking for somebody who was as researcher and writer, and I said to myself that job was for me. I remained with the company for four years, becoming educated about telecom technology, figuring out corporate strategies, and other useful skills, and started its transmission research business, just as optics was starting to take off in the industry. Some of the most vital aspects of my experience at NBI included appreciating the extraordinary importance of doing independent, primary research as well as developing a healthy skepticism for any public statements made by equipment suppliers. As 2018 comes to a close, I have tried over the years to do my best to uph ...

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Ciena: ZTE Will Be Pursuing Retribution

October, 2018

fibeReality’s latest intelligence indicates that Ciena took advantage of the ban earlier this year against ZTE, allowing the former to take a significant amount of market share away from the latter in emerging markets, including India. Ciena’s unexpected, substantial jump in revenues last quarter seemed to at least partially reflect this strategy. However, the supplier may wind up paying a very high price for its short-term gains, especially in apparently gambling that the prohibition would remain in place for a long time. Like too many others, Ciena’s executives failed to see what should have been obvious -- that the Trump administration’s game plan has been to use sanctions and tariffs in order to bargain for better trade arrangements, not to come close to permanently keep them in place. Once again, we were not concerned about ZTE’s long-term viability. The problem now is that Ciena ra ...

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Google: Objectives and Undesirable Results

October, 2018

In the past, fibeReality has addressed the matter that Google/Alphabet’s publicly stated objectives in getting into new businesses, including in the optical realm, need to be viewed as part of its overriding goal of getting an increasing number of eyeballs to view advertisements on its search engine, its principal revenue producer. So, we read with amusement the following recent article: “Why Google Fiber Is High-Speed Internet’s Most Successful Failure,” in which it is stated “what if the company’s goal was never to unleash the disrupter itself so much as to encourage incumbent broadband providers to do so....?” Since 2010, this writer has been involved in maintaining that there was no doubt that was the sole aim of the company. While the piece also does not get the motivation behind Verizon’s FiOS correct, it also ignores the negative impact of Google pretending to be “a competitive IS ...

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Verizon Wireless: 5G Home Subterfuge

October, 2018

In some ways, Verizon has a worse credibility situation in the short term with its current emphasis on residential applications for 5G, than what happened with FiOS last decade. At least with the latter, it was able to relatively quickly project homes passed with fiber in advance going in lots of metropolitan areas, rather than the next-generation wireless solution becoming live to only a few neighborhoods in each of the four large cities announced. With FiOS, Verizon could argue at a minimum, the potential for unlimited capacity as well as definite, lower operational costs. With 5G Home, not only are the questions concerning a return on investment worse, given much costlier infrastructure spending, but Verizon does not appear to be charging rates commensurate with a truly premium service, while also bending over backwards with perks. Also, Verizon obviously has no plans to stop making m ...

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Apple Story of Shot Across Lumentum Bow

October, 2018

fibeReality understands that a partial reason for the Street hitting Lumentum so hard several days ago was a note from CLSA that Apple is designing its own VCSEL array with the intention of using a foundry to produce the device. While we are not inclined to believe at this time that the report has much merit in terms of any short-term implications for Lumentum, the assertion suggests to us that at a bare minimum, it could be one or a combination of the following: a warning, a punishment for an earlier or unknown faux pas by the large optical components firm, or the prevalent inclination of the customer to engage in “nasty tactics.” Hypothetically, it cannot be ruled out that Apple could bypass Lumentum at any time, and go directly to WIN Semiconductors. We think the foundry firm was by far the most responsible for putting together the ecosystem, which allowed this large smartphone provid ...

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Intel Renews Hyperscale Optic Machination

October, 2018

According to fibeReality’s newest intelligence, we have never been more persuaded that Intel is selling optical components to hyperscale data center operators below cost, while the vendor has very little confidence it can achieve profitability, as a result of sufficient volume. Ever since the supplier had started offering quantity discounts to the space with PSM4 devices (and then later with CWDM4 hardware), we have believed that it has played a major role in bombing pricing, which in due course, led to the devastation of the optics ecosystem. We have also received information that even when Intel was running its Optical Platform Division, before divesting those assets last decade, that it had a clear inclination to treat these sales no better than it would loss leaders. For example, we understand there was irreparable damage to the 40G SFP market, when Intel aggressively undercut the pr ...

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NeoPhotonics: A Rationale for a Resurgence

October, 2018

Ever since the last optical boom in China, it has been easy to be critical about NeoPhotonics concerning limitations for growth in its traditional space with much of it based on a disproportionate amount of overexposure to that country’s marketplace, on the very low prospect of getting acquired (especially at any kind of a premium), and on the lack of a comprehensive diversification strategy. (NeoPhotonics did very briefly bring up “adjacent markets” during its last earnings call.) While all of these factors are clearly related to each other, it is the third one that could provide the supplier with the biggest competitive advantage in the long term. In the short term, fibeReality anticipates that NeoPhotonics will likely be one of only a few US optics companies to substantially benefit from the revival of ZTE, a recovery by the large customer, which this writer predicted (see the comment ...

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Infinera/Coriant: On Capping Installed Base

September, 2018

We have mentioned that a number of operators with a sizeable installed base of either Infinera or Coriant are undeniably re-evaluating their network strategies. Of course, there would be even more of an imperative, if the service providers hit the wrong kind of lottery jackpot, and have gear from both vendors prevalent in their infrastructure. Our first reaction would be to advise them to strongly consider just filling out the remaining capacity of the existing equipment, and move on to another vendor for growth with new systems. However, the reality is that network planners at a high level still have to at least go through the motions of determining the strategic direction of the “new” Infinera because their jobs could be on the line. Yet, while intensive intelligence gathering, from a consulting firm, such as by fibeReality, chiefly concentrating on feedback from customers in the same ...

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Corning and Multimode: Fujikura Linkage

September, 2018

fibeReality has lately been discussing a lot about the collapsed ecosystem in the active optical equipment space, as well as the growing market for MultiMode Fiber (MMF) in the large data centers of the hyperscale players. In the passive fiber sector, there is a thriving ecosystem, with only a limited number of major suppliers globally, including Corning, OFS Fitel, Prysmian Group, and Sumitomo Electric Lightwave, but it is set up around the ubiquitous SingleMode Fiber (SMF) category. The vendors only have so many draw towers, etc., as well as operations to cable up SMF, which is experiencing very high demand, driven a lot by the hyperscalers themselves. In particular, Corning has its capacity in its worldwide facilities aligned to SMF, and in order to ensure it is adequately serving the needs of its customers, including the two that have been the biggest in the world, Verizon (counting ...

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400G: Impulse to View Rate in a Vacuum

September, 2018

At ECOC this week, the aspect that will almost assuredly not come across is that large optical component firms have to be asking themselves whether major development efforts on high-end optical components, especially on the client side, is logical anymore. So, regarding work on FR4, DR4, etc. modules -- why would they not be clobbered on price to the same extent as happened with the QSFP28 on the CWDM devices? Making it even worse is that at least for the next three-years, the customers that need 400GbE will just be the big-four hyperscalers. Only two of them have demonstrated a willingness to make investments, which have been strategic at best, in an environment in which capital is hardly plentiful. A further indication of the slow uptake on the 400G client is that a number of the optical system suppliers are looking for a modification on the use of one of the standards. In adding in th ...

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24 Tough Queries for Vendors/Users at ECOC 2018

September, 2018

Unfortunately, this writer will be unable to be in Rome, as I will be attending a much happier, personal event later in the week. fibeReality thought it might be a good idea to propose some hard-hitting questions that our loyal readers might consider asking suppliers at the annual hype-fest, just to shake things up, if nothing else. Here are 24 suggestions: 1.     To any supplier, associated with COBO, is it not time to move on to co-packaged optics, which although would not be easy to pull off, it would be a more practical means of accomplishing the chip-to-chip concept, if it ever does happen in the foreseeable future? 2.     For Macom, is it not a little disingenuous to say that lasers in your PICs are integrated, since the former cannot be accomplished with silicon photonics, and is the company adequately able to differentiate itself from products offered in a similar 200G/400G annou ...

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CFP2-ACO Modules: Lingering Cash Cow

September, 2018

In fibeReality’s last blog article, "Oclaro: Waiting for the Other Shoe to Drop,” we analyzed some of the probable consequences for the vendor after the closing of the purchase by Lumentum. In this piece, we will concentrate on the future performance of Oclaro’s ACO transceivers, its most successful product family in recent times. Despite the company’s revenues on coherent technology as a whole remaining fairly consistent, there are current challenges on profitability. One prominent analyst on the Street expressed to us the view that post-200G, CFP2-ACO, there is nothing left in the Oclaro story. Before the announcement of the Lumentum purchase, we agreed with this perspective in that there was never a convincing narrative for a second act, and that the plan presented in moving forward was based principally on market hype (unusual for the leadership), as it was all about the earlier prep ...

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Oclaro: Waiting for the Other Shoe to Drop

September, 2018

With Oclaro in a waiting game, as China must provide antitrust regulatory approval for Lumentum’s acquisition, and although fibeReality senses that that some people at the former have moved from disappointment to at least acceptance, others, depending on where they sit in the organization remain pessimistic. For example, individuals on the sales side are nervous about the possibly of being replaced by counterparts at Lumentum. Greg Dougherty, who did a skillful job of pulling Oclaro back from the brink of bankruptcy, when he started in the head position, will apparently not be involved in the daily operations of the combined company. While it is common for there to be reluctance for the CEO of an acquired company to be even put on the board of the firm making the purchase, we wonder if the issue is not a lot deeper, as for example, Lumentum does not seem to be in a hurry to find a new CF ...

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Inphi Could Not Resist Hyperscale Vortex

September, 2018

fibeReality first used the term, “hyperscale vortex” relating to ADVA Optical Networking, as it was one of the examples of foreshadowing of the complete destruction of the optical ecosystem. Although ADVA’s CEO had reservations about getting too involved with the hyperscale data center operators, the vendor eventually succumbed to getting deeper into this quagmire. When it came to Inphi, the allure of joint development and marketing work with Microsoft when the supplier was still an up-and-comer had to be even more overwhelming. In our recent article, “Inphi’s ColorZ: New Buyer Constrictions,” we made the case that the product has fallen way short of expectations of deployment even at Microsoft. While we have tended to admire Inphi as a vendor in the past, from the beginning, anyone listening to its messaging would have received the distinct impression that for distances of 80 kilometers ...

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Nokia Networks is a Wireless Firm -- Period

September, 2018

While Nokia continues to sell optics solutions, and fibeReality even sees the possibility for a significant upside for it in the space in the short term, its legacy, its heart, and most importantly, its top-level executives, are rigidly tied to the wireless business. If there happened to be a company based in France interested in purchasing its optical products, we are pretty sure it would have happened a while ago, just as it divested such assets, when it was part of NSN. The biggest problem is the apparent lack of sufficient appreciation at the top that 5G wireless is not only mostly about fiber transmission, but the ability to control the interaction between the two technologies has never been more important. So, while the corporate brass appears to be overly obsessed in preventing capable optical people from the original Alcatel-Lucent to gain a foothold with a little power, they win ...

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Cisco Systems’ Optics Pastime

September, 2018

It all began for Cisco Systems last century during the bubble with its purchase of Cerent for a whopping amount of money, as it was a startup merely providing a basic SONET transport system. Although for about 15 years, Cisco made optical networking a prominent part of its corporate messaging, since then, it has been pretty much ignored at that high level in presentations, and any comments about the technology are confined to an occasional announcement, such as at OFC. Also, optics development is restricted to a relatively small, seemingly contented operation without too much pressure of having to make a significant impact on the bottom line, especially with the overall performance of the firm having improved in the last couple of quarters. While it had to be a minor relief to the optical division that the Service Provider (SP) segment finally had some revenue growth to report after over ...

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Finisar Could be Telegraphing 5G Fronthaul Gear

September, 2018

fibeReality is aware of some speculation that Finisar’s CEO, Michael Hurlston, was supposedly brought in to build up the 3D-sensing business in order to sell it to his former company, Broadcom. Yet, with our expectation of Gross Margins (GMs) in the business inevitably plunging, as we have referenced in the past, Broadcom would be even less inclined to become a player in this space than it was from the beginning, especially when it did not fit into its mandatory requirement of having GMs in the 60 percent range. While we also believe that it probably would not be the worst idea in the world for Finisar to make penetration into the traditional VCSEL bare die space, the possibility of greater inroads by II-VI in that business would make it a less attractive option. When it came to 5G wireless internationally, although Finisar’s former CEO, Jerry Rawls, did not hesitate to point out the ben ...

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AOCs: Unappealing Choice Up to 30 Meters

September, 2018

Assuming Microsoft goes ahead with a proposed project of a flattened switch architecture in its data centers, the use of Active Optical Cables (AOCs) for the 0-to-30-meter lengths would undoubtedly remain under consideration, even though the operator is leaning towards the use of VCSELs. However, we believe there would definitely be obstacles to the utilization of AOCs in this application, which would probably make them inherently unattractive. It is interesting to note that from an installation perspective, as opposed to an inventory standpoint, Microsoft does not make a distinction between MultiMode Fiber (MMF)/VCSELs and AOCs. The deployment of either would be as if it were doing so with passive copper cable. In this article, we will also be looking at the future deployment of AOCs in general. One hurdle with AOCs in the 30-meter-and-under app, which would likely make Microsoft unhapp ...

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Inphi’s COLORZ: New Buyer Constrictions

September, 2018

Although Microsoft’s major push to try to create a market for Inphi’s COLORZ solution was memorable, it was unsuccessful, as the former has remained the only customer so far. In fibeReality’s opinion, the lack of traction by the module is more than Microsoft’s unique optical networking proclivity, and so, although we are inclined to believe it will likely be a buyer of the 400G version as well, the technological limitations of the product, in general, have resulted in significantly less purchasing than would have been expected by the champion/development partner. Clearly, Inphi has wanted to give the impression for a while that there would be at least one other major purchaser of the device, and we thought that Amazon, given its positioning of data centers, most resembled Microsoft, and thus, would be in the running. The problem is that there may be a good reason why Amazon has not been ...

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Microsoft’s Flatter Data Center Difficulty

September, 2018

Despite the greater efficiency of the newer networks of the hyperscalers, as their infrastructure continues to grow in size, they will gradually start grappling with similar problems (although not necessarily even close to the same degree) as traditional ISPs. Even in early 2016, we wrote: “[T]he emphasis on DCI ‘throwaways’ may be exaggerated – and that [optical] overbuilding may be a means to keep capital costs down, as there would continue to be growth with the older generation deployments. For example, we have learned that certain transport gear installed about three years ago in Google’s network has not been removed, yet.” Besides dealing with multiple layers of networking, another concern for operators, such as Verizon, has been to avoid “putting too many eggs in one basket,” which especially hit home after 9/11. One of Microsoft’s ideas, which still remains only in the investigati ...

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Ciena/Packet Design: First-Rate Acquisition

September, 2018

While Ciena’s historic record for acquiring companies has left a lot to be desired, its most recent buyout of Packet Design was a shrewd move. In contrast, Infinera, which at quite a late date, ostensibly was forced to pick up a struggling firm with a lot of incumbent roots, despite the continuing insistence by the only PIC-centric supplier that it possessed a leading-edge solution. Conversely, Ciena’s purchase of the Nortel’s assets to save itself was about nine years ago, and it is becoming even clearer to us that our expectation for a while will come to pass that along with Huawei, the two firms are set to end up ultimately dominating the international optical system market, especially on the terrestrial side. Yet, despite Ciena’s strengthening position in the space, the leadership still cannot seem to avoid making remarks that defies credulity. Verizon’s next-generation metro contrac ...

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COBO’s Scheme: Odd Life/Demise Likely

August, 2018

fibeReality expressed our point of view that if COBO ever happens, it would be in the form of Co-Packaged Optics (CPO). In our opinion, it is also instructive to closely examine both COBO’s historic relevance to the present, crumbled optical ecosystem, which we were anticipating right up to the precipice. We believe this situation was almost solely created by the detrimental mentality of Microsoft, as well as other hyperscale data center operators. These players might be shocked by the increasingly derogatory remarks we are hearing regarding even the intellect of their network planners and engineers from executives at major optical component companies. Brownie points are only given out at the procurement departments of the Microsofts for bringing in say, transceivers for ten cents less, enabling countless competitors with lower-cost solutions to enter the space, while seemingly ignoring ...

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Finisar CEO’s Babe-in-the-Woods Rhetoric

August, 2018

In an article published this month, Finisar’s CEO, Michael Hurlston said: “To be truthful, I didn't know much about optics.” Certainly, by now, such a revelation would not be news to anybody in the industry, and fibeReality believes the continuation of making statements at least about his previous high level of ignorance would start to have diminishing returns, particularly with analysts on the Street. When Hurlston earlier in the year asserted, "That there is a much wider level of competition [in optical communications] than has existed in semiconductors, has been a big surprise,” we actually gave him the benefit of the doubt in pushing the naivete story a little much either for purposes of modesty or to give competitors a false sense of confidence. There was no other legitimate explanation, as somebody in the telecommunications world, would have to be under a rock not to know that chip ...

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Multicore Fiber: Just a Cool Design for Now

August, 2018

Research on MultiCore Fiber (MCF) was first conducted almost four decades ago. It is definitely a real and a cool technology, and a user could eventually purchase greater capacity and density, including more optical communication gigabits per second per square millimeter than with current solutions. Still, despite continuing development work on the concept, especially in recent years, there are enduring challenges over both cost and practical use. On the first matter, the expense would be much higher than a single fiber in that a common configuration is with seven singlemode cores, and so, it is hardly like dividing by n, and it could even be the equivalent of as many as five fibers. On the second consideration, there has to be more of a compelling demonstration of fan-in/fan-out devices. Today the entire infrastructure is set up for 125-micron OD fiber with a single core. Now one would ...

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The Case for 4x50-Gig Indeterminately

August, 2018

While fibeReality is willing to double down on our wakeup call to the hyperscale data center operators on the need for them to help reconstruct an optical ecosystem for development efforts on 4x100GbE for the long term, and for 50G in the short term, it is important to take a step back on what they could actually live with -- for an indefinite period of time. In the past, we have consistently not only pointed out the technical difficulties in moving to higher data rates, but cases in which we believed executives at these big private networks were disingenuous in suggesting they lacked the means of adaptability in a capacity crunch. Also, when fibeReality saw the initial unviable schemes produced by standards bodies for 400GbE, we were an early advocate for moving down to working on a more conservative 200GbE standard. Moreover, although there is an undeniable enigma associated with stran ...

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