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Fiber Optics News, March 27, 2000
Nortel Gathers Expensive Acorns For Wild Winter
By Evan Bass
On the surface, the nearly $8 billion that Nortel Networks [NT] has shelled out over the last three months for three fledgling optical companies may seem risky at best, absurd at worst.
But everyone knows you have to spend money to make money. And while Nortel's bankbook may be a bit thinner this spring, it could be fat and happy by early next year from technology gained by the acquisitions of Qtera ($3.25 billion on Dec. 15), Xros ($3.25 billion on March 14) and CoreTek ($1.43 billion on March 21).
"We bought Qtera to implement systems with the longest reach," says Greg Mumford, Nortel president of optical networks. "We acquired Xros to introduce photonic switching to the optical Internet. This is important to allow the optical Internet to scale, and to reduce the cost when the really high-capacity Internet arrives. Now with CoreTek's tunable lasers, we introduce agility or flexibility to the optical Internet."
Of course, neither CoreTek nor Xros have actual products yet, and won't until at least the end of this year. But who cares about today when you're building the network of tomorrow?
CoreTek's tunable laser technology is at least a year-and-a-half to two years ahead of anybody else, says CoreTek president and CEO Parviz Tayebati. Like Xros, CoreTek is in the pre-revenue stage. The Wilmington, Mass.-based, 120-employee company has raised $26 million of venture capital, including $12 million from Oak Investment Partners.
CoreTek uses vertical cavity surface-emitting lasers and microelectromechanical systems technology for optical networking. Its products use tiny, movable mirrors to alter the wavelength of light emitted by semiconductor lasers and other optical components, thus changing the wavelength of light in real-time to monitor and re-route traffic.
"In an all-optical network where wavelengths are being switched, we take a fiber from New York to Chicago and at that point switch it to L.A.," Mumford says. "And we have another fiber coming in from Toronto to Chicago. We want to switch one of those wavelengths to L.A. If those two wavelengths turn out to be the same, which they very well could be, they could collide on the fiber to L.A. So you need the capability to dynamically assign one of them to another color. In the longer run, that's what this technology is for, and a key part of the value proposition to enable the all-optical network."
CoreTek's components operate in 10 Gbps systems, the speed that Nortel has implemented now.
"The first application of this technology will be as a substitute for the multiplicity of lasers that we have today," Mumford says. "We have a different laser for each different color or different wavelength. With this device, we'll have one device for a broad spectrum of colors. That application will be in our long-haul systems; initially it will propagate from there and it will be in the system on-ramps."
CoreTek's technology will complement Xros and Qtera, Mumford says.
"To get the all-optical infrastructure, you need the link capabilities we got with Qtera," Mumford says. "And then you need the photonic switch [from Xros] so we don't have to convert to electrical in the case of switching wavelengths. And then you need the dynamics of being able to set the wavelengths [from CoreTek] so that if two wavelengths are targeting on the same channel, we can dynamically alter that."
Will Nortel lock up its checkbook for a while? Not likely. The company has money to burn. With a market cap of around $177 billion, the Ontario company would be ranked among the top 10 largest in the U.S. if it weren't North of the border.
Nortel also got a boost on March 15 when PaineWebber analyst Walter Piecyk upped his price for Nortel to $175 from $135, and his 2000 earnings per share forecast to $1.31 from $1.29.
Nortel was ranked No. 1 globally in optical Internet solutions for 1999, according to reports from the Dell'Oro Group, RHK, and Warburg Dillon Read. The global optical Internet market is expected to grow from $19.4 billion in 1999 to $52.3 billion in 2003, a compound annual growth rate of 28 percent, RHK says. |
