Company mentionned in Forbes article date 1999-11-29:
"The telecom industry is going optical, replacing chip-based gear with new systems that deal only in bits of light. It will mean building great new fortunes--and destroying
old ones."
Hooked on Photonics
By Neil Weinberg
MAYBE YOU HAVE HEARD about the public offering of Sycamore Networks Inc. a few weeks ago--the unknown firm with $11
million in sales now worth $18 billion. More wild ones are emerging. Rumor has it that Optical Networks, an outfit in a similar line of business but with no customers and no
sales, is wrapping up a round of venture funding that will value it at $750 million.
Sycamore and Optical are just an early rumbling in the tectonic shift that has begun shaking the telecommunications industry: the move to optical networking, the hottest
new market in high tech.
Just as the PC usurped the mainframe and set off explosive change in computers, new optical technologies may someday overtake electronics and topple the established telecom order. Vast fortunes will go up for grabs. No less than AT&T, Lucent and Nortel will face untold threats to their kingdoms.
Optical newborns may rise up to become the next Dell or Microsoft.
The competition is accelerating. Lucent has spent $20 billion to acquire Ascend and Nexabit. Cisco just agreed to pay $7.4 billion for Cerent and Monterey Networks, despite
underwhelming sales. Ciena paid almost $1 billion for two optical acquisitions.
JDSUniphase, an optical-parts maker, just agreed to pay $2.8 billion to acquire an outfit named Optical Coating.
It's a bit much for some. "Cisco's acquisitions might make sense in a microcosm, but they've reset" prices in the
industry, says Ciena Chief Executive Patrick Nettles, whose own stock is up over 200% this year. Sycamore is "caught in a trap of their own success."
Fueling this frenzy are a building boom in fiber-optic lines and soaring demand for bandwidth. Telephone companies have used fiber for two decades, but the network boxes that reroute and switch the signals have always been based on silicon chips and copper circuitry. Silicon speaks the language of electrons, but fiber-optic cable uses the
language of photons. Translating from one to the other gobbles up time and energy.
Replace all of it with new optical machines that work in the realm of photons--no translation required--and fiber-optics capacity will expand even more. And so will
the fortunes of those who get in early and build the right light-bending products.
All this change is hurtling forward at an uncharacteristically hurried pace. For decades the makers of telecom equipment put reliability above innovation, introducing new-generation products only once every
few years. Now they are forced to live on Internet time like everyone else.
"It's a huge shock to the guys in white smocks," says Frank Dzubeck, president of Communications Network Architects, a
consulting firm. When Sycamore touted an ability to turn out new optical products so fast they would be available for just-in-time delivery, "I had telecom company people
telling me it couldn't be done." |
