Infinera’s Lumentum Band-Aid

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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 it is conceivable that it may buy Infinera a little time in perhaps not getting its devices already in networks yanked out as quickly. Theoretically, Lumentum certainly does not have anything to lose with this association in that for better or worse, it is trying to position itself further upstream.

As was the case with several past technology announcements, Infinera is jeopardizing its credibility. Once more, we point to the fact that the supplier could have defended its position in the DCI sector by having Transmode utilize Acacia Communications’ chip (which would have undoubtedly further swollen the component company’s valuation), and use its expertise in metro technology to differentiate a new solution from the other folks, which are gaining share in the market. Instead, Infinera has decided to remain inflexible in moving away from its own PICs, which evidently resulted in an inability to get either the desired density or openness demanded by customers.

If it has not happened already, it is probably only a matter of time before Infinera starts at least whispering to investment analysts that its affiliation with Lumentum could help open the door to business with AT&T, given the incumbent service provider’s hype about OLS. Of course, we are very skeptical about the carrier ultimately moving too far in this direction.

In terms of the competitive threats on the DCI front, we had indicated that ADVA Optical Networking should have been included by Ciena in its list of principal vendors. In its last quarterly report, ADVA said, “DCI is probably 25% of our overall revenue number. In the past, these were in the 10 to 12% range.”

On Huawei Technologies, Infinera made the standard complaint about pricing when it comes to the Chinese player: “[W]e’re also seeing in certain applications Huawei in their new DCI space be even more competitive than I’m used to seeing as they enter in a new market. I mean, virtually or literally giving applications away, particularly around the DCI space.” Yet, with Infinera not being in the vicinity on the minimum technical requirements, cost becomes an irrelevant issue anyway.

Regarding Coriant, we think it may benefit more than may be fully realized with its deployment of a backbone infrastructure for the Ministry of Communications of Turkmenistan. The use of its platform partially for DCI applications may increase the comfort level at hyperscale data center operators, as the corporation has not been a traditional vendor in that space.

[written by Mark Lutkowitz]