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Infinera: Potential for Exit by Chip Firm Buyout

November, 2020

fibeRealty has speculated in the past about Infinera doing a spinoff of its DSP/PIC combination. However, given the current intensity in the consolidation of semiconductor vendors, and the supplier's extremely low valuation, a chip supplier might consider buying the entire company, and then either manufacture-discontinue or sell off everything, but the ICE-related components. Unsolicited, the next CEO at Infinera, David Heard, volunteered the following during the last earnings call: "I think recently, we've seen the demand for optics, DSPs have a, let's say, scarcity and a very, very high multiple in terms of the demand, as you've seen by the purchase of Acacia and the recent purchase from Marvell or intent to purchase Inphi. And so we think it's a very, very good place to be." He then also stated: "It's good for our business model, good for the customers." Heard also seemed to be quite...

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5G mmWave: Escaping "Plato's Cave"

November, 2020

fibeReality has strived to demonstrate that Verizon Wireless' reasoning behind its obsession with enabling mmWave spectrum has no other logical basis than to provide the necessary backbone for loads of downlink capacity to its subscribers. We have even pointed out that the explanation has been roughly exposed publicly perhaps as a trial balloon to see if there would be any negative ramifications on its corporate valuation. In the meantime, there continues to be the paradox of industrywide excitement of T-Mobile increasingly taking on additional customers, which only exposes the operator further to inadequate capacity delivery in the future.  Also being ignored is the anguish of the AT&T network planners in having insufficient mmWave enabled to adequately support its customers moving forward. Certainly, there are business relationships between suppliers and buyers, which just naturally...

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Battling False Narratives on 5G

October, 2020

fibeReality has close to 5,000 followers on LinkedIn. It may be difficult to find other research firm specialists focussing on optics and wireless that can make that claim. We provide useful market intelligence in our blog articles and reports that cannot be found anywhere else. Nevertheless during a recent presentation at EPIC, we predicted that despite providing a reasonable rationale for Verizon's emphasis on mmWave, we were 99% sure it would not change the industry-wide narrative. (By the way afterwards, an analyst at one of our prominent competitors asked about pricing on 400ZR, and we provided the most up-to-date answer for the first time publicly during our interaction with the speaker from Inphi.) Conversely, we do not believe in coincidences. About a week after publicly announcing our new report, certain parties appeared to feel obliged to come clean, albeit not in a totally...

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Verizon 5G: Existential Business Case

October, 2020

The priority of Verizon Wireless' 5G strategy has never been based on the false, industry-wide narrative of offering its subscribers any unique applications broadly, but more simply on its intense concern of running out of adequate wireless capacity in general, resulting from the burgeoning data requirements of its present and near-term customers – in short, ensuring its sheer survivability is the business case. In fibeReality’s opinion, Verizon has been spending an enormous amount of money without the definite assurance of a single user app even today. Despite the obvious drawbacks of millimeter wave, the MNO has been in the process of cornering the Central Business Districts (CBDs) of NFL metropolitan areas and other strategic cities across the US, while packing the greatest number of bits into a massive amount of spectrum. Although being compelled to quickly respond to getting...

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Ciena’s Clash with Cannibalization at Webscale Operators: A New Report

June, 2020

Ciena is at an important inflection point involving its future strategy. Its biggest, near-term struggle right now seems to be in adequately responding to the demands of the hyperscale data center operators for a 400-gig ZR device, the total world market fibeReality projects to grow to $175 million in 2023. Is there a possibility that the supplier remains primarily focused on its latest generation of equipment mainly involving 800G, 600G, etc.? Conversely, does it indeed make a dramatic shift with a full commitment towards pluggable coherent optics? Most ominously, future types of modules along with white boxes taking advantage of them could lead to substantial cannibalization of not only Ciena’s offerings, but every full optical system player in this space. Otherwise, despite some notable, very costly missteps earlier in its existence, Ciena at least for now, is at its strongest...

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Inphi: Ongoing Obsession with COLORZ Brand

January, 2020

In quasi-opposition to fibeReality’s sentiments regarding Inphi’s exceedingly defensive posture on COLORZ, resulting from a great deal of internal sensitivity to its lackluster sales of the module, which we have amply described in the past, there is a school of thought, which supports a slightly contrarian position. We concur with many of those points, such as the high likelihood that the supplier received a tolerable return on its investment (as we addressed previously), as well as that the cost to the vendor sacrificing alternative, potentially more beneficial actions, while a valid concern, can scarcely be determined easily. Certainly, the most compelling assertion, which we have written about extensively, is that like COBO, and ultimately co-packaged optics, as well as earlier with this 80-kilometer concept, Microsoft has an appalling history for coming up with innovative...

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Acacia: Frantically Grasping for a Miracle

December, 2019

In what seems to be a feverish attempt to extract itself from what may turn out to be one of the biggest exit blunders in optics history, Acacia Communications, which for most of its existence was considered quite secretive, has ostensibly set a record for a publicly-held supplier in the space, after the intention of its acquisition had been announced, in terms of devoting extensive resources to public relations/marketing matters. Usually, the messaging activities of such a public company are pretty confined, like in just providing the standard, condensed, quarterly financial reports and continuing to show up at major business conferences – and even Acacia has avoided issuing any formal press releases. Still, there has been a non-stop PR blitz of new pieces on its blog, articles in other publications, social media submissions, published white papers, and an email blasted invitation...

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Cisco: Accelerating Pace Away from Systems

December, 2019

The critical reason for Cisco Systems’ elaborate dog and pony show focusing on its latest ASIC, Silicon One, appears to be the simplest one: to indirectly start laying the foundation for its eventual exit from the system space across the board. Although fibeReality has discussed the possibility of such a radical change in the supplier’s corporate strategy previously, shifting market dynamics have apparently forced the supplier to move more quickly towards what it perceives to be the greater appeal of underlying, innovative technology solutions: hence, an even greater focus on the mantra: “chips, optics and software.” However, we continue to assert that the second category will remain by far the least vital to Cisco because it simply does not tend to generate the higher margins of the other two sectors, and it has always represented such a tiny percentage of its overall revenue....

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CPO Gaining on COBO Regarding Irrelevance

December, 2019

Notwithstanding the title of this article, a good number of optical suppliers, which want to do business with Microsoft, are likely to be too wary about totally ceasing resource allocation to both the Co-packaged Optics (CPO) and the Consortium for On-Board Optics (COBO) concepts. fibeReality understands that the head of COBO, Brad Booth, no longer reports to the top cloud infrastructure executive, Jeff Cox, who is obviously pushing the CPO effort. Unsurprisingly then, we have also just learned conclusively that COBO will not be deployed at Microsoft. Concerning CPO, which of course, also has the support of Facebook, it is the holy grail, and we started addressing the major technological challenges over a year ago. However, even though at ECOC 2019, one or more speakers entertained at least the partial employment of CPO at 51.2 terabits per second, our confidence level in the use of...

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Sumitomo’s Datacom VCSELs: Saving Face

December, 2019

Despite being a data communications module producer, Sumitomo’s purchase of Emcore’s VCSEL business in 2012 was a mistake. The former did not really know what it was buying. (We understand there was even a lawsuit because Sumitomo felt it got sold a bill of goods.) For example, all of the high-quality epi growers had already left the American supplier. Yet, regardless of paying only a relatively small amount of money ($17 million) and despite the fact that there has been barely any association between the Japanese vendor and these types of lasers in the industry, there has been an insistence to avoid losing face on the deal. (It may even explain why employees who were let go after closing the operation in Albuquerque, New Mexico in 2014, were given generous, six-month severance packages). After the technology was moved to Japan, Sumitomo was willing to lose money on continuing...

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Inphi: Boosting Valuation for Later Exit

November, 2019

While fibeReality is unaware of the exact date of when Chuck Mattera, the CEO, of II-VI, negated the proposal to buy out Finisar’s IC group, it was around the time of Inphi’s rhetoric seemingly signaling a desire to exit. We understand that Ford Tamer, Inphi’s CEO, was pretty devastated by the refusal. Both Tamer and Michael Hurlston, Finisar’s ex-CEO definitely underestimated Mattera, at least on this deal. Perhaps if permission was received, it may have led to a relatively immediate acquisition of Inphi by Broadcom, for not only the InP capability that would have been gained from Finisar’s IC group, especially in anticipation of Broadcom moving upstream with transceivers (albeit, we continue to believe in a very targeted way), but also the other chip capabilities that the big IC firm either lacked, or would be able to gain additional market share. After getting burned on...

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Broadcom: Selective Focus on Transceivers

November, 2019

  As fibeReality pointed out in a recent article, the counseling from Hock Tan, CEO of Broadcom, to his former executive on the wireless side of his business, Michael Hurlston, who became head of Finisar, was to make an already terrible situation become as unrecoverable as possible. We understand that it had at least the appearance of a tag-team effort, as Ford Tamer, CEO of Inphi, another alum of Broadcom, became an active participant, as he made the offer (which again, II-VI CEO, Chuck Mattera blocked) to purchase Finisar’s IC group. His interest in trying to help Tan further debilitate the large optical module vendor, including in encouraging the foolish change in strategy to a contract manufacturer model, seemed logical, partially in that we expect Inphi to be acquired by the chip giant down the road. Obviously, Inphi would have also benefited in the shorter term by acquiring...

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Infinera: An Unanticipated Destination Point

November, 2019

Given this writer’s justifiable criticism of Infinera for almost the entire existence of the firm, it has been a little awkward to begin suggesting to optical engineering managers either looking for work or considering moving on from their present positions that they may want to take a serious look at opportunities at the supplier. fibeReality has been steadily gaining confidence that the prospects for Infinera have never been more positive. We are convinced that the influence of board member, Greg Dougherty, with his intense personality to be a winner, while being fiercely loyal to his good friends, including the CEO, Tom Fallon, along with the product reconciliation efforts of COO, David Heard, who has played an instrumental role in gradually changing the corporate culture away from spending lots of money on unprofitable gear, will likely result in a sustainable turnaround, and...

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II-VI’s Gloomy Look Under Finisar’s Hood

November, 2019

In fibeReality’s opinion, irrespective of II-VI leadership’s original plans with its big merger, figuring out what to do with the mess that was left by Finisar’s interim CEO, Michael Hurlston, along with the implicit approval of the corporate board, will be the biggest challenge in its entire existence. We certainly anticipated some problems a year ago: “[T]he extent of the problematic overlap between the artificial, perforated lines created by Finisar…is uncertain. The basic idea was to break up the company into pieces, and potentially sell them off. However, in doing so, a lot of synergies get thrown away in that the company is not fully taking advantage of the strengths of its personnel. With Finisar having gone down this road for a while, it may be doubtful as to whether II-VI can undo all of the damage….” Also at an EPIC conference in October, we discussed that the...

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II-VI: Ordinary “Intel” of Optoelectronics

October, 2019

During the firewall period, waiting for the merger with Finisar to be completely approved, from the CEO of II-VI, Chuck Mattera, people in the industry got the impression that he expected the combined company to become kind of the “Intel” of optoelectronics. Putting aside the fact that the actual Intel has played a prominent role in helping to destroy the data communications optical ecosystem, and perhaps is not the best example to use in that context, II-VI will be getting on a me-too line of large component companies, which have either begun the transition from modules to chips or are involved in contemplating the idea. Broadcom and Lumentum are the most notable players. There is Sumitomo, which is similarly looking to both move down the food chain, and we would not be surprised if it decides to offer VCSEL bare die in a big way for data communications applications. In addition...

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Lumentum: Cloistered Management Method

October, 2019

  In the early 1980s, the concept of “Management By Walking/Wandering Around” or MBWA reached the height of its acceptance as an effective means of remaining bonded with lower-level managers as well as with other workers, and it had the added benefit of addressing significant problems beneath the surface before they got out of hand. It was practiced by Greg Dougherty as CEO of “Oclaro,” who would often just go to various offices unannounced, and such actions undeniably helped to bring the optics company back from the brink of bankruptcy, including not getting blindsided by unexpected market shifts. Conversely, according to our intelligence, Lumentum Holdings’ Alan Lowe, the CEO, is highly dependent on receiving the bulk of his input from a very tight, inner circle of top-level executives (although we were alarmed to hear that he does not tend to be receptive to communication...

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Infinera’s XR Optics: “Fat & Happy” Front

October, 2019

At first blush, it seems illogical for Infinera, a supplier, which has been fighting for its survival, to be promoting a revolutionary change in the aggregation and access portions of the optical marketplace. However, fibeReality now believes the company chose to amend its “Tellabsation” counternarrative because manufacturing its own proprietary 800-gig DSP daughter card (using subcarriers), with similar functionality to the AC1200 from Acacia Communications (planned to become part of Cisco Systems) in order to compete with Ciena’s WaveLogic 5 Extreme, is deemed critical to the future success of the Groove platform as well as for the current leadership to maintain at least a minimum amount of credibility. While nobody should bet the farm on XR Optics, given the challenging hurdles that need to be overcome, the effort would not only make the transition away from being a PIC-based...

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3DS VCSELs: Instantaneous Bubble Burst

October, 2019

  fibeReality retraced the last three years of the six-inch 3D Sensing (3DS) VCSEL wafer marketplace as part of our preparation efforts in presenting at an EPIC conference last week. As a result of our latest intelligence gathering efforts, it became evident that simultaneous to the great achievement by Lumentum Holdings (along with its partners) in shipping more apertures within a two-month period in the fall of 2017 than in the entire history of such devices, there was the beginning of a marketplace “pop,” which gradually worsened. In particular, there were a couple of vital matters left out of what otherwise seemed to be a very successful story. After initially dismissing Finisar because it remained stubborn about sticking with the four-inch VCSEL diameter, Apple was forced to go back to the supplier to renegotiate a contract to obtain a rather substantial number of wafers at...

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Additional Upshots at Dublin Optics Show

September, 2019

As a complementary piece to our last article, “Throwing Down the Gauntlet at ECOC 2019,” we provide some other final thoughts on the conference, including the following 10 points: 1.     While switching, particularly the all-optical variety, has never taken off in a big way, it was most conspicuously mentioned by Microsoft, as a portion of a very short presentation focused on a general cross-disciplinary approach with developments in the cloud. Actually, the operator brought up the concept of an extremely quick wavelength router it has touted in the past as it probably thought it had nothing to lose by mentioning it to a big crowd of optics engineers. It was then discussed by Mellanox Technologies in relationship to higher bandwidth being enabled at Web 2.0 companies with such scalable devices. Later, Glenn Wellbrock, from Verizon mentioned the use of a photonic switch in trials...

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Throwing Down the Gauntlet at ECOC 2019

September, 2019

  On our second blog, it was mentioned that fibeReality tried to get formal confirmation on the coming death of COBO as well as challenged the usual rosy view of silicon photonics at the same workshop. Moreover, there was our disappointing take on the subsequent event in the same conference room. We also had a mixed reaction to Infinera’s XR Optics concept. In this article, we will discuss several other provocations, which took place during Market Focus sessions. Certainly, the most stunning reaction to one of our questions in Dublin came from Tom Williams, Vice President of Marketing for Acacia Communications, who was discussing the possibility of the marketplace taking too many small steps in achieving 400G without looking to immediately get up to 1.6 terabits in the future. Given that Cisco Systems’ previous acquisition of the DSP provider at 100G, CoreOptics, did not really...

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Finisar: Agonizing Wait to Cultural Disaster

September, 2019

  Some previous assumptions go out the window, and certain, subsequent actions make greater sense, with our current understanding that Finisar’s destiny was out of the hands of its founder, Jerry Rawls. He did not voluntarily retire, but was forced to step down, from the CEO’s office, by the board of directors of the corporation. Looked at in this new context, we would assert that Rawls could have likely saved himself by just using a little imagination in making the financing work to enable a purchase of Oclaro. The appointment of the last CEO was only for one purpose: to sell the firm (of course, his quick dismissal validates that claim). Now while the trade conflict between China and the US allows the people working at Finisar to wish that approval for the deal with II-VI will not happen, it is probably inevitable that the culture of the former will erode anyway, whether it...

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COBO: Mismanaging One Person’s Power

September, 2019

At OFC 2019, this writer happened to be sitting next to an analyst, who is with what is officially considered, by certain people in the market, as an influential research firm. I told this individual that at a couple of relevant presentations from Microsoft, including one from Jeff Cox, Partner Director Network Architecture, that I did not hear the term, COBO mentioned – and that our company position was that Brad Booth, Principal Network Hardware Manager, at the cloud player, was totally responsible for pushing that concept. The response was, “Well, you know that Cox is Booth’s boss.” (Of course, I nodded affirmatively, while thinking to myself, “Wow, I am supposed to assume that I was taken to school!”) The reason why I did not ask Cox at that other session about COBO was because I was more alarmed by his insistence that there would not be a need for MultiMode Fiber...

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Tibit: Last “Telecom Valley” Optic Hurrah

August, 2019

  Over the years, nobody can deny that some of the most prominent “Petaluma Telecom Valley” entrepreneurs/engineers were courageous in taking on the huge, technological challenges, in the inherently hardest sector to generate meaningful and sustainable profitability, from the perspective of both optical infrastructure suppliers and service providers: the access portion of the network. It has always been difficult because much of that “last mile” involves residential traffic across a range of incomes, but regardless, there has increasingly been an overall propensity on the part of these subscribers, in general, to expect superior service, without a significant rise in the price. There has also been the classic struggle to gain easy, direct entry into these homes. Nevertheless, the Petaluma approach was to take the new technology to the next stage of complexity, while still...

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Lumentum: Early DCO Departure Projected

August, 2019

As fibeReality addressed in a recent article, “12 Aftershocks From Cisco-Acacia Quake,” one of the optical suppliers, which will experience the negative effects the longest, is Lumentum Holdings. The bottom line is that at least quasi-ownership of the DSP technology is a must in order to effectively compete in the DCO space, and it becomes even more critical in moving to higher data rates. The combination of the new game plan of “the bulk” [of another of $40 million in synergy costs]…be[ing] realized towards the tail end of [the next five quarters],” along with “DCO shipments…expect[ed]…to grow through the fiscal year and be a meaningful part of our telecom revenue over the next several quarters,” appears to demonstrate that Lumentum intends to start withdrawing from that coherent space relatively quickly. We also trust that having a true CFO came in handy in making...

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MACOM: Engineers’ vs Street’s Perception

August, 2019

fibeReality has discovered a definite gulf in opinion on the prospects for MACOM Technologies Solutions’ new CEO, Steve Daly (along with the other top-level executives), to turn the company around, between the engineering crowd, which is inclined to be pessimistic on its future, and Wall Street analysts, who are leaning in at least a cautiously bullish direction. Such a dichotomy, one way or the other, is hardly an uncommon occurrence, when it comes to the evaluation of optical vendors. As we discussed in the past, financial institutions (as well as the overwhelming bulk of market research firms) apparently do not tend to have adequate long-term relationships with trusted, independent sources of information, particularly technologists, especially on the all-important, demand side of the marketplace. In the case of MACOM, we have been impressed (and even a bit shocked) by the visceral...

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