Interesting comments from Cisco tech advisor.
=DJ Lumenon Eyes Fiber-Optic Gear Mkt With New Chip Device
By Ben Dummett
TORONTO (Dow Jones)--Lumenon Innovative Lightwave Technology Inc. (LUMM) says it has found an alternative way to significantly lower the cost of adding capacity to fiber-optic communication networks. Faced with the need to transmit data, voice and video over one network pipe, operators are looking for ways to expand the capacity of their existing systems without incurring the costs of replacing them. Currently, network operators rely on dense wave division multiplexing, or DWDM, equipment, which includes components made by JDS Uniphase Corp. (JDSU) and other companies, to boost transmission capacity of their fiber-optic networks. Fiber-optic networks transmit digital traffic using light. JDS Uniphase, which was created out of the merger in July of JDS Fitel Inc., Nepean, Ont. and Uniphase Corp., San Jose, has seen its stock jump since the tie-up because it is a leading supplier of components for DWDM systems.
Lumenon, a start-up based in Dorval, Que., builds hybrid glass circuits that fit on silicon chips and effectively work the same way as traditional DWDM multiplexers, explained Stephen Litwin, head of investor relations at Lumenon. But Lumenon's equipment can be made at a "fraction of the price" of current DWDM multiplexers because the manufacturing process isn't as labor intensive.
Lumenon "stamps" the hybrid glass circuits onto the silicon chips, whereas traditional multiplexers need to be made one at a time - which requires more labor, making the process more costly, Litwin explained.
Other Start-Ups Developing Similar Technology
Lumenon isn't the only start-up developing this kind of technology. For instance,Bookham Technology Ltd., a start-up based in the U.K., has also developed a way of putting optical circuits on a silicon chip. Its equity investors include Cisco Systems Inc. (CSCO) and Scientific-Atlanta Inc. (SFA). Jacek Chrostowski, technology program manager of Optical Internetworking at Cisco and a member of Lumenon's technical advisory board, said Lumenon and Bookham aren't likely competitors because the components they make are complementary. Chrostowski stressed that his position on Lumenon's technical advisory board doesn't mean that Cisco endorses Lumenon's product.Indeed, Cisco has representatives on the technical advisory boards of a slew of start-ups even though it doesn't necessarily endorse their technology, analysts said.
Still, Chrostowski said that part of his role as a technical adviser is to keep Lumenon informed about what Cisco would want out of Lumenon's products. And the message Cisco is giving Lumenon and others is that it wants the costs for fiber-optic components reduced "probably by a factor of 10 at least, and not in 10 years but a year from now or two years from now," Chrostowski said.He also thinks Lumenon is on the right track. "I have known the (founders) for 20 years and I know the technology is for real," meaning it can be produced in larger quantities and at lower cost than traditional DWDM multiplexers, Chrostowski said. Lumenon was founded last year by scientists Dr. Iraj Najafi, the company's chief executive, and Dr. Mark Andrews, its vice-president and chief technical officer, who together developed the technology. And last month, Lumenon brought in Dr. Chia-Yen Li, formerly senior scientist at MicroTouch Inc., as chief operating officer.
In addition, about 25% of Lumenon is owned by Molex Inc. (MOLX), the Lisle, Ill.-based electronic component manufacturer. Molex, which acquired its stake earlier this year and has a seat on Lumenon's board, will equip Lumenon's technology with its fiber-optic interconnection products, Litwin said.
Molex May Increase Its Stake Over Time
If Lumenon achieves its goals, then "chances are that Molex will increase (its stake) over time," Xavier Clairardin, vice-president of Molex's fiber-optics division, said. And so far, "everything is right on plan," he added.
Lumenon, which is still in the process of putting the finishing touches on its technology, expects to deliver the product to Molex around October or November. Then Molex will fit Lumenon's chips with interconnection components and ship the devices early next year to potential customers for testing. The devices will be tested by Molex's existing customers, which include Lucent Technologies Inc. (LU) and Ciena Corp. CIEN), Clairardin said. Though Lumenon isn't yet selling its products, investors seem enthusiastic about its prospects. On the OTC Bulletin Board, Lumenon has risen since Sept. 1 to its current price of 6 23/32, from 4 1/2. Moreover, the company said Wednesday that it has reached a pact with Groome Capital Inc. to raise US$1.6 million in a private placement of units. The units comprise one common share and one common share-purchase warrant.
-Ben Dummett; 416-306-2024; ben.dummett@dowjones.com
(END) DOW JONES NEWS 09-08-99
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