BLOG

Major Pitfall in Financing Technology

February, 2017

When venture capitalists, angel investors, and other types of financiers are approached for funding they need to be aware that many corporate managers and engineers (not necessarily with intention) have a tendency to confuse the following three terms, which have definite demarcation lines: 1) technical exploration, 2) technology development, and 3) product development. The levels of capitalization necessary and the associated risk are not only affected by the actual stage of the process, but a lack of sufficient appreciation for avoiding the temptation of prematurely bypassing the second leg in the progression can have disastrous results. Certainly, it can often be clear when a company engages in just a research exercise. The problem is that many start-ups set up shop right away because they are in a hurry to bring out a solution for a given need at the time. While they may get lucky and ...

Read More

Singapore: GlobalFoundries/Coherent/Poet

January, 2017

As a delegate to the EPIC mission to Singapore, this writer was impressed by the entrepreneurial enthusiasm, work ethic, and exceptional hospitality of the people in the country. While I am hardly a fan in general of public-private partnerships or too much of an emphasis on technology development at universities in which the best engineers are not necessarily in the front lines of businesses, which are more inclined to push for technological R&D more pragmatically, the relatively small population of Singapore helps ensure that there is limited separation (as well as more direct cooperation) between the three major entities involved in optical development. The nation is also just about at top of the list in the world regarding economic freedom, which is critical in allowing for thriving businesses. One of the key aspects that tends to get overlooked is despite being a small country, there ...

Read More

Double Standard When It Comes to Verizon

January, 2017

Although during its existence as a corporation, Verizon has made its share of mistakes, there are often contrasting principles at work with some members of the press and certain industry analysts when it comes to the firm, especially in relation to AT&T. While the latter is looked upon more favorably nowadays, its strategy has been based mainly over the years in staying as big as possible for its own sake, including: the quasi-re-incorporation of Ma Bell with four of the seven "RBOCs" (despite taking on a massive number of residential lines, particularly copper that can often be money losers), the purchase of DirecTV (with the unstated rationale of offloading video from capacity-constrained, copper-based modems and creating confusion in the market because of the lack of synergy between the operations), and the announced merger with Time Warner (with no apparent questioning of the wisdom ...

Read More

Inphi/ClariPhy: Solider Acquisition Aspirant

January, 2017

fibeReality believes that the factor that makes Inphi the most attractive as a buyout candidate is its recent purchase of ClariPhy Communications. With PAM4 technology yet to be sold in any kind of volume by any vendor, Inphi can potentially provide the necessary engineering and financial resources to fully develop a high-end coherent DSP to the merchant market that would provide an alternative to Acacia Communications, which has been able to monopolize the space. As we have discussed in the past, the lack of a second supplier makes differentiation highly problematic for those system vendors, which do not internally develop their own DSPs for these applications. Assuming that NEL does not come out with its own version of this kind of processor, which would be a compelling competitive solution, a duopoly situation would also help ensure that any kind of pricing wars would be kept to a min ...

Read More

Ciena Should Buy ADVA

January, 2017

While the ex-Nortel contingent, which has dominated the direction of Ciena in recent years, would almost assuredly be opposed to the idea because it would be viewed as a direct threat to its turf, the supplier would greatly benefit from purchasing ADVA Optical Networking. With the number of DWDM greenfield opportunities being few and far between at the moment, buying additional market share in the optical space would seem to make a lot of sense. In addition, Ciena would be able to leverage its existing relationships with large incumbent service providers, particularly in the US, to make significant penetration with ADVA’s gear, resulting in not only substantially greater revenue, but much higher margins for the German supplier. Most importantly, we believe that the top leadership at Ciena, which has had a propensity to adopt the philosophy of its latest major acquisition, would greatly b ...

Read More

Huawei May Hit Optics Component Space with Both Barrels

December, 2016

fibeReality believes that Huawei Technologies is striving to develop coherent optics and optical switching components, as well as potentially other types of new devices further down the food chain with the intent of going head-to-head across the world with major competitors in the market, including Finisar, Lumentum Holdings, and Oclaro. It seems that a logical assumption can be made that Huawei will follow the money in terms of prioritizing on particular technology. As we have recently discussed, the temptation for Huawei may get to be irresistible, particularly in its home country, in which massive networking buildouts will evidently continue indefinitely. With state control over the economy, there is always the possibility that it may be decided without any notice to substantially cut back or even halt purchases of optical equipment in China for a while. Yet, the major means of the co ...

Read More

Metro 100G “Heresy”

December, 2016

In a 2015 post discussing an OFC presentation of a well-known engineer in the business, titled “ROADMs Instead of Metro 100G Systems?”, the response from a technologist was, “Very interesting view, some may cry heresy.” fibeReality has been consistently rather bearish on public network deployment of metro 100G gear, including an earlier article: “Absurdity of Stressing Metro 100G Now,” posted in January 2015. During this month, we pointed to Cisco Systems’ silence on the matter as well as on our daily update page, noting Ciena stressing “the blur into both the convergence of long-haul and metro.” Although within the ill-advised endorsements of an optical supercycle, there is still a tendency to mention as one of the major contributing factors, high-end deployments of metro gear at service providers, the evidence continues to accumulate that the projections by some analysts concerning fut ...

Read More

Optical “Supercycle” Farce

December, 2016

In one our recent daily updates, we pointed out: “How can the [optical supercycle] term be used when one of the biggest vendors, Ciena, is only expecting single digit growth in fiscal 2017?” Also, the supplier evidently felt compelled to bend over backwards, and at an unknowable price, to report a record order of backlogs. With the exception of Chinese system vendors, the booming business mainly applies to component companies supplying them. Therefore, an article about three months ago was incorrect with its title: “A dormant tech sector is suddenly surging like it’s 1999.” Obviously, certain analysts on the Street have been pushing the exaggerated characterization for their own purposes, with our favorite that it is "a bona fide optical supercycle." Although Infinera has been struggling from in our opinion, principally managerial incompetence, certainly it would be performing much bette ...

Read More

Finisar Execs Should Get Out Now

December, 2016

While the CEO of Finisar has been associated with the company for over 25 years, the average time that the rest of the executive management team has been in the optical components space is around 18 years. Undoubtedly, they have to understand how terribly unique their situation has become after years of mounting obstacles that have made its business quite unattractive in the recent past. The combination of the Street inexplicably driving up the valuation of a single company, Acacia Communications, to extremely unjustified levels, which positively affected other vendors in the market, along with the exploding demand for componentry in only one country, China, could not have been anticipated. It could be said with a high level of confidence that such a confluence of events will never happen again. Although we believe that Finisar still has room to somewhat improve its financial position in ...

Read More

Top 10 Enigmas at Infinera’s Analyst Day

November, 2016

Our initial thoughts on Insight Infinera 2016, as outlined on our daily updates page over a week ago, was partially that “time will unlikely be a friend [to the vendor] as questions over long-term survivability are apt to become more pronounced.” We also stated that “[t]he only edge that we have been aware of over the years has been the ease of turn-up.” Actually, in having all of the DWDM channels built in on a card, such an advantage would be the bare minimum expected. At least the vendor made an attempt to clear up one of our questions in our last blog post on Infinera showing trans-oceanic growth (when it is not a full turnkey vendor), by stating it is about trends across the board. Overall, we found the long presentation to be at least somewhat delusional with extensive development continuing on its PIC approach (that might even require moving on to a different technology than Indiu ...

Read More

Xtera’s New CFO May be Its Only Hope

November, 2016

Joe Chinnici was unceremoniously let go by Ciena, as the ex-Nortel executives at the company evidently advocated replacing him. In complying to the Sarbanes-Oxley requirements, there were initial glitches in those new rules, and deals were being held up – he apparently became a scapegoat. Along with the CTO, he was an important check against the Nortel coup. Now Chinnici has taken on the major challenge of turning around Xtera Communications, which will hardly be an easy task. If the very competent executive is successful, it would be one of the most remarkable accomplishments in the history of the optical space. Toward the end of last year, we wrote an article called, “Xtera IPO an Act of Desperation?” While it could still be debated whether the vendor was in a frantic state to exit, it certainly was very anxious to have another round of funding. Given that it had been around for so lon ...

Read More

Coriant Not Culturally a High-End Leader

November, 2016

Although there is a lot of significance in certain quarters being attached to AT&T’s trial of Coriant’s 400G system (as we recently pointed out on our daily updates page), the engineers formerly with Tellabs and Nokia Siemens Networks (NSN), which make up the heart of the private equity-financed vendor, do not seem to have a great deal of familiarity with being a leading player at higher data rates for traditional long-haul and short-haul service providers. Tellabs itself was a metro transport player with its primary focus on lower speeds including optimizing around 10G as well as delivering very efficient 10-gig services, while allowing for the co-existence of 100G services within the same channel plan. While NSN made some penetration with 100G technology, and engaged in activities with some of the European telecom providers involving hero experiments at 400G, there was no significant d ...

Read More

Submarine Festoons Needed in US

November, 2016

Although undersea festoon networks can be found in many parts of the world, one would be hard-pressed to locate a single case in the States. From the perspectives of lower cost, speedier and simpler deployment, as well as indiscernible environmental impact, they should be a slam dunk. Nevertheless, for many years, the permission that is necessary from the various individual localities (all with different requirements) along with the studies that are demanded on both the west and east coasts of the country have made the otherwise practical usage of festoon applications cost-prohibitive, especially given the relatively short distances of the loops in this kind of an infrastructure. It is just one more example of how governmental bodies along with extremists on the environment get in the way of technological progress. In addressing the relatively small number of influential people in the la ...

Read More

Acacia’s Bridge Too Far

October, 2016

The photo associated with this article shows the Arnhem John Frost bridge in the Netherlands, which became really famous with the 1977 epic film, A Bridge Too Far, which depicted the tragic and overreaching allied scheme, Operation Market Garden, in September 1944 to end the war in the European theater by Christmas. Of course, when it comes to Acacia Communications overextending itself with the second public offering, we are not talking about the loss of lives, but with the comparatively unimportant matter of making money. In actuality, with the Street’s poor reaction to what we referred to as “gall” in a previous post, may have prevented a more precipitous drop in the valuations of not only Acacia, but potentially other publicly-owned optical component vendors as well, which has occurred with the very recent, less than stellar, quarterly performance by ZTE (a large customer of Acacia). ...

Read More

CenturyLink Could be a Sleeper

October, 2016

When a typical industry observer thought of CenturyLink over the past several years, the following aspects probably came to mind: only a handful of major metropolitan areas that are a vast distance apart from each other, a large “independent telco” mindset, longer metro/regional networks that can require costlier equipment outlays, lots of rural customers in which it is difficult to provide broadband services, and not necessarily the most innovative service provider in the world. Without question, the reported merger with Level 3 would significantly transform the company. Yet, even before this story about the transaction, it seems now, notably in hindsight, there were significant signs that CenturyLink has been setting the table to be a different type of operator compared to how it has been positioned historically, as well as to possibly be highly differentiated from other carriers aroun ...

Read More

Infinera’s Biggest Concern is Ciena

October, 2016

A commonly heard phrase over the years has been that nobody gets fired for buying from Cisco Systems. When it comes to optical networking products, we have reached the stage in which the same can be said for Ciena, although we believe it has come about despite its top leadership. While both Infinera and its archrival continue to benefit greatly from the US government protection from Chinese competition, which in our opinion is for no legitimate reason, customers are obviously going to think at least twice before buying from the PIC-fixated supplier because once again, its seems that its long-term survival is in doubt. As usually the case, listening to one of Infinera’s quarterly earnings calls along with seeing the slides associated with the event, always raises more questions than provides answers. After its latest conference, we have the following 14 inquiries for the top executives at ...

Read More

All-Optical Switches: Still Illusory?

October, 2016

Over 30 years ago, there began discussions in the industry about the development of an all-optical switch. Some of the comments sound familiar to those of today. In April, 1983, The Economist addressed them: “[Optical] transmission performance is degraded by inefficient switching via electronic devices at either end of a system.” Also, there was the statement that one school of thought favors an “in incremental or hybrid approach.” Although there is not much hype in the market right now about the widespread use of such devices, both major vendors, Huber+Suhner Polatis and Calient Networks, long-time survivors since the big bubble burst at the turn of the century, are expressing a great deal of optimism, particularly relating to at least three of the big four hyperscale data center operators, Amazon, Facebook, Google, and Microsoft, supposedly taking a serious look at their systems. Howev ...

Read More

Acacia Will Likely Push 400G DSP

September, 2016

The message that the Street may be going way overboard with Acacia Communications’ valuation, let alone its new secondary offering, may be beginning to resonate. For example, one can read, “Acacia: A Company That Will Need To Be Resistant To The Ire Of Investors.” Yet, the money to be made by at least certain institutional investors with the price going up and down while still remaining above $100 a share, was obviously deemed to be insufficient. We assume that just as with the first offering, a narrative will need to be constructed in order to support the second issuing of stock, and we suspect it may be that the company will be well-positioned with funding to support and potentially dominate the 400G coherent Digital Signal Processor (DSP) space, just as it had done at the 100G rate. While some 200G applications are emerging, suppliers such as NTT Electronics (NEL) and ClairPhy will be ...

Read More

If Verizon Has Vague Rationale, Think FCC

September, 2016

For Verizon, there has been the matter of a tremendous buildout of Fiber-to-the-Home (FTTH) infrastructure in the past, which was clearly cost prohibitive, or more recently, supposedly picking up this activity with solutions that do not make sense technically. There have also been the head-scratchers on the purchases of both AOL and Yahoo, the former we addressed over a year earlier. They all have one aspect in common. They are either a means of finding additional ways of obscurely taking fuller advantage of FCC rulings that are favorable to the service provider or of finding an outlet of escape from those regulations unfavorable to the company. During the last decade, Verizon appeared to be justifiably criticized by analysts on the Street and others for its massive construction of FTTH, particularly at the beginning of the process. The economics were not justifiable and there were hurdl ...

Read More

Ciena’s Incumbent Engineers Saved Firm

September, 2016

If Ciena’s CTO, Steve Alexander, been appointed CEO after Patrick Nettles stepped down from the position, the supplier would not have experienced the extreme vacillations in business performance and the negative consequences from the "Nortelization" of the firm would have been totally avoided. Alexander’s sheer love for what he does for a living allowed him to put up with what we believe has been a combination of the leadership’s lack of intimacy with the business dynamics as well as the absence of the necessary temperament over the years. Despite Alexander being one of the founders of the company, Nettles evidently thought a person in sales would be better suited to move the company forward. In our opinion, he may have been heavily influenced by what a lot of Americans often automatically equate with a high level of competence – a British accent. In order to balance out the “coup” that ...

Read More

Nokia Directionless in Optics Space

September, 2016

An industry observer might ask a Nokia executive about its plans for 400G and there is a good chance that the response is more likely to be a general one reflecting a lot of uncertainty over what major moves to make in the optical marketplace. The commodity-like atmosphere affects other large vendors in the space as well with limited opportunities to differentiate with value-added software in the vast majority of the business. Yet, given its roots, culture, and organization, Nokia is uniquely searching for options that are likely beyond its reach or may just not turn out to be that attractive for future growth. Some of Nokia’s loss of market position has been self-inflicted. During Verizon’s unprecedented push with GPON, the supplier was the dominant force. With NG-PON2, it appears that the vendor may not even get a seat at the table for Verizon’s next big push, which like the previous e ...

Read More

Infinera’s Lumentum Band-Aid

August, 2016

In a Light Reading article, its Editor-in-chief wrote: “Eager to bask in the 'open networking' sunshine that has given the switch and router fraternity a shiny new glow, optical systems vendor Infinera…has teamed up with components specialist Lumentum Holdings…to show how metro transport networks can also benefit from the programmable networks trend.” This comment understates the desperate need by Infinera for an Open Line System (OLS) in the Data Center Interconnect (DCI) space, as its market share there continues to dwindle, especially from attacks by newcomers offering this capability internal to their already more attractive, higher density systems -- not to mention it being on the record against white boxes. It is hard to imagine how this partnership helps the system vendor very much in that by necessitating a separate box, the density issue is tremendously magnified. We guess that ...

Read More

Google Fiber Fizzles as Predicted

August, 2016

In March, we posted an article called “Google’s Fiber: Laugh All the Way to Bank,” in which we stated: “While [Alphabet’s] Google has made a certain amount of investment in the deployment of fiber just to keep up the pretense, as we wrote in late 2014, its vested interest is in encouraging broadband build-outs by other entities in order to increase Internet traffic, which would have a positive effect on its core advertising business." Moreover, when this writer was a Principal at Telecom Pragmatics, Inc., we put out a press release back in April, 2010 with the headline, “Google's Fiber for Communities Will Probably Be Token Effort…” Now this month in the Wall Street Journal, there is a piece called “Google’s High-Speed Web Plans Hit Snags.” It simply defies credulity that the company’s “initial rollouts proved more expensive and time consuming than anticipated.” Once again, Google's excr ...

Read More

Acacia’s Valuation: The Street’s Cruel Joke

August, 2016

While Acacia Communications’ recent business performance has been impressive, and deserves to be rewarded, there can be no justification for a market cap that comes even close to exceeding the valuations of either Finisar or Ciena. With the limited number of tech IPOs, it appears that some institutional investors have constructed a mini-bubble based on just one optical company to quickly grab some profits before the economy in general is likely to take a steep nosedive. The IBD's 14-company Telecom-Fiber Optics industry group reached a 15-year high, of course, going back to the end of the last major bubble, after the financial community decided to treat the historically, conservatively-minded service providers, as if they would need bandwidth for an indefinite amount of time. The optical industry is still paying the price to this day for the results of overcapitalized vendors and network ...

Read More

Juniper’s Aurrion Buyout: Tech Nightmare?

August, 2016

Juniper Networks probably had very good reasons for becoming more vertically integrated in the optical space including perhaps the need to internally control its supply of transceivers as well as maybe strengthen its competitive position by acquiring intellectual property. Yet, its purchase of Aurrion and its complex set of moving parts at what seems to be a rather handsome price for the componentry company’s investors appears even more questionable than the router firm's previous pickup of BTI Systems. Aurrion’s focus is on wafer integration, the same type of technology that Intel has struggled to commercialize in the past. Although once again, following the industry in moving away from the original vision of silicon photonics, in our opinion, this particular adoption of a hybrid platform is truly challenging in placing tiny layers of Indium Phosphide onto the Si wafer. Putting aside th ...

Read More