Rockley Headship Legacy: SiPh Hangover

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Rockley Photonics’ founder and CEO, Andrew Rickman, could never seem to escape dealing with Silicon Photonics (SiPh) throughout his ventures over the years, paradoxically, representing a microcosm of the industry’s difficulties in working with the technology successfully in general. To be sure, he had an extensive technical background in the field, and was an early advocate of its potential, even dreaming about Bookham, which he founded in 1988, becoming the next Intel, with the focus on optical chips. In addition, the company was responsible for creating a good number of the original patents in the space. Nevertheless, after the bubble burst at the turn of the century, it was Bookham’s purchases of component businesses further up the food chain, particularly from Nortel and Marconi, which resulted in its survival, but not in the long-term continuation of Rickman as CEO (although he became the chairman of the board until 2005). Bookham’s relatively early abandonment of the SiPh space from a direct sales standpoint in 2003, should have been a clue as to its actual viability of such solutions for the world. The firm later licensed this IP to Kotura, and Rickman joined its board of directors (and later became chairman). Ultimately, all things considered, Bookham had a relatively happy ending, becoming a part of Oclaro. When it came to Kotura, although it was successful in evidently unloading a supplier with practical, product shortcomings to Mellanox Technologies, in looking at the numbers, it is probably a reasonable assumption that the deal failed to result in a stellar return on investment, if there was even a payback at all. Still, given Rickman’s positive reputation, and his shrewdness, he had no problem in getting impressive amounts of investment funds for Rockley, which eventually settled on being a pure SiPh play – but even afterwards, it still has been inevitably flailing around to come up with a story for a high-volume application.

When it was more in stealth mode, the initial focus of Rockley was apparently on offering a wavelength router, most notably for the hyperscale data center operators. Although the idea of going switchless had a great deal of merit, it never seemed to take hold in that space. (As an aside, fibeReality has not picked up any real interest, even with a very low cost, truly high-speed, all-optical, cross-connect type of device from wireless operators, even for 5G purposes.)

After Rockley started publicizing its efforts in a big way, it seemed to take our admonition seriously that it should consider staying away from positioning itself as a SiPh player, at least from a marketing standpoint. Yet, given Rickman’s experience, and the renewed (albeit, unjustified) attention to the approach in the marketplace, it was likely inevitable that the vendor would not be able to resist the temptation, especially in its future ability to acquire additional investments in the company.

Rockley has done a good job with achieving a high level of name recognition. As with other SiPh suppliers, it began to hype new apps, such as optical sensing (actually, sensors were one of Bookham’s original products). Rockley also had to be pragmatic in looking for ways to make money now, and so it entered the mature and saturated 100G AOC space.

Still, it is fair to say that despite its current rhetoric to the contrary, Rockley’s primary target is now in offering co-packaged optics. While we have expressed our doubts on its viability, perhaps it will turn out to be a safe bet, as at least one or two of the Web 2.0 firms may insist that a large supplier buy Rockley, as the newcomer already has well-established ties to these US customers.

The big sticking point would be the $30 million outlay to Rockley from China-based Hengtong Optic-Electric, which would likely make installations of its gear problematic for these hyperscalers. Another hurdle would be the proprietary nature of the solution of the former. Conversely, given China’s aggressiveness in becoming self-sufficient in optics, perhaps there will be an exit opportunity for the startup there.

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As always, fibeReality does not recommend any securities, and this writer does not invest in any companies being analyzed by us.

[written by Mark Lutkowitz]