Cisco: Buyer of Potential Finisar-JDSU Combo?

December, 2014

If Finisar purchases JDSU’s CCOP division, would a systems integrator be interested in buying the combination? Unquestionably, there have been rumors in the past that Cisco Systems would buy Finisar, which with CCOP, would make Cisco’s previous component acquisitions pale in comparison in terms of cornering the market. Moreover, the full system supplier has been Finisar’s biggest customer for a long time. There is a school of thought that when Cisco decided to cease having a distinct transport business unit, it was making a statement that optics stopped being an end in itself – it was really a means to an end. While selling optical network gear remains part of its general strategy, its principal purpose is supposedly to tie routers and the server farms as well as offer the backbone for its software. According to this theory, Cisco’s purchases of CoreOptics and Lightwire are...

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InnoLight IPO: Google's Vertical Integration Without a Mess

June, 2015

We have been pondering the question of what happens when emerging optical component vendors, being financed by mega-data center operators to achieve the lowest cost possible, need more money, especially for new research and development purposes. The best answer, which is starting to become self-evident, is for the componentry company to go public, because with the undeniable cachet of a Google-backed firm (in the case of InnoLight Technology, Google Capital), the highest valuation can likely be achieved. The perceived worth of these newcomers in being purchased by a larger competitor in this presently unattractive business would apt to be much lower as there would probably be a considerably higher level of scrutiny given to matters like the potential to sell their devices to other than their “captive” buyers. For Google and other prominent enterprises, the IPO route for these firms...

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Finisar Should Play Hardball, Then Exit

October, 2015

Finisar’s current business model based on the all-encompassing optical components approach in the datacom/telecom market with a large amount of vertical integration from chips to subsystems, along with designing every conceivable flavor demanded by the space of a particular data rate, has become unsustainable. It is bad enough in a relatively slow growing business, particularly with 100G, to need to start developing the next form factor, so quickly after the supplier releases the last one, but also there is competing in a highly fragmented arena, especially against a lot of Asian manufacturers, which tend to put low prices way ahead of profits. Then to also have some of the major customers in recent years become competitors (either directly or indirectly) – probably makes it sheer insanity to continue such an operation. With Jerry Rawls taking over the reigns again at Finisar, and...

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Coriant: Market Perils on Investment in Distressed Assets

December, 2015

There can be a fundamental problem when private equity firms buy up companies in a depressed condition in that the overwhelming desire to sell off those assets at the most favorable valuations can be in conflict with the best interests of the market, especially when the overall space is not that healthy. In the case of Coriant, it is one thing if it is a relatively quiet participant in striving to accommodate “third party [O]pen [L]ine [S]ystems” (OLSs), it is quite another to be an extremely aggressive cheerleader in order to possibly increase relatively short-term revenue, because at least on its face, it is not in the best long-term interest of the rest of the transport suppliers (as we pointed out in a recent article). While we continue to believe there will be hurdles in moving to OLS on the public network side, we have found out that this activity has started already in the...

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Acacia Communications IPO: A Compelling Story?

January, 2016

The optical industry was standing by for Acacia Communications’ S-1 for a lengthy amount of time, and there had been some recent conjecturing that it may not happen at all. The stakes were clearly high in that it appears to have been the only VC-backed 100G firm. While Acacia has made impressive penetration into the market with superior DSP technology, the question surrounds what it can do for an encore that would be good enough to attract investors in a meaningful way on Wall Street. Certainly, the process in Acacia going public was hardly done with a lot of fanfare, reflecting the current relatively low number of IPOs occurring in the technology sector in general, and the close to non-existent activity in the fiber optic space. The vendor had filed confidentially back in August (actually a common practice now for all companies with yearly revenues of less than a $1 billion). Then,...

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