You are wrong on Simon Cao's 36 patents, most of which were issued while he was at Etek, where he invented optical isolators, filters, and other WDM devices.
With all due respect, the jury's still out. Please post URLs for issued patents. One of my optical engineer friends has done several searches and found two, another found three. Where are the others? If they were issued while Simon Cao was at ETEK, they would be listed in the government records.
The following quotes show the changes made to SEC filings between January and April. Each has been updated, so if Cao had received any further patents, they would be noted --- that or Avanex is withholding material information. Which I doubt.
From the S-8, dated April 6, 2000:
We rely on a combination of patent, copyright, trademark and trade secret laws and restrictions on disclosure to protect our intellectual property rights. Although we have recently been issued one jointly-filed U.S. patent, we cannot assure you that the remaining 27 U.S. patent applications that we have filed, seven of which were jointly filed, and six foreign patent applications that we have filed, one of which was jointly filed, will be approved . . .
From the 424B4, dated February 4, 2000:
We rely on a combination of patent, copyright, trademark and trade secret laws and restrictions on disclosure to protect our intellectual property rights. We cannot assure you the 25 U.S. patent applications that we have filed, six of which were jointly filed, and four foreign patent applications that we have filed, one of which was jointly filed, will be approved, that any patents that may issue will protect our intellectual property or that any patents issued will not be challenged by third parties.
From the 424A, dated January 18, 2000:
We rely on a combination of patent, copyright, trademark and trade secret laws and restrictions on disclosure to protect our intellectual property rights. We cannot assure you that the 25 U.S. patent applications and four foreign patent applications that we have filed will be approved, that any patents that may issue will protect our intellectual property or that any patents issued willnot be challenged by third parties.
The rest of the nits mostly dramatize how fast the company grew between the time of the filing you quote and the last time I visited the facility.
Are you saying AVNX added to their 145,000 sq. feet between February 2000 and the time of your visit?
From the latest 424B, dated 2/4/00:
As of December 31, 1999, we did not have any material commitments for capital expenditures. However, we expect to incur capital expenditures as we expand our manufacturing operations in the near future. Our capital requirements also depend on market acceptance of our products, the timing and extent of new product introductions and delivery, and the need for us to develop, market, sell and support our products on a worldwide basis. From time to time, we may also consider the acquisition of, or evaluate investments. . . . In September 1999, we leased one building in Fremont, California for our corporate headquarters, totaling approximately 54,000 square feet, which includes sales and marketing, research and development, administration and manufacturing. This lease will expire in October 2009. Under the same lease, we were granted a right of first refusal until April 2000, which we have exercised, to lease an adjacent building, approximately 91,000 square feet, at a predetermined rate. We also lease approximately 6,000 square feet of office space in Richardson, Texas for sales and the operation of The Photonics Center. This lease expires in February 2006.
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Based on these two descriptions, it's clear the company had no further plans as of December 31, 1999, but they knew they would be adding in the near future. I have a pretty good understanding of commercial real estate and find it hard to believe they 1) located a new facility 2) negotiated and signed a lease 3) ordered and installed equipment 4) tested lines and put them into operation and 5) hired and trained the 450 "animated Asians" you described in your newsletter --- all in under 3 months. Were they well under way at the time of this filing and intentionally keeping their shareholders in the dark? Not likely. Companies don't lie to the SEC. They can obfuscate. They can play hide-and-go-seek by placing critical revelations inside pages of innocuous boilerplate. But they can not lie --- not when the feds are watching.
As of February 4, 2000, Avanex had 145,000 square feet for all operations --- sales and marketing, research and development, testing, administration, and manufacturing.
For a glimpse of how expansions are done, take a look at SDLI's addition to their facility in Victoria, B.C.:
The original announcement states their intentions:
October 26, 1998:
. . . ". . . Because of the growth in our DWDM product lines, we are announcing today a major expansion of our SDL Optics manufacturing facilities in Victoria, British Columbia. These facilities provide advanced packaging and assembly for our DWDM fiber optic based product lines. The 33,000 square foot facility expands our SDL Optics manufacturing floor space by over 100%. It is expected to be operational by October 1999. We believe this new facility will be a key element in continuing our success in the DWDM marketplace."
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And the opening a year later:
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San Jose, California, October 6, 1999 -- SDL, Inc. (Nasdaq: SDLI) today announced the official opening of its new manufacturing facility in Victoria, British Columbia for its subsidiary, SDL Optics. The new site more than doubles the manufacturing space of SDL's prior facility to meet the expected continued rapid growth in demand in the dense wavelength division multiplexing (DWDM) marketplace. SDL Optics manufactures the company's highly successful 980nm high power, grating stabilized pump modules that are enabling the introduction of higher channel count DWDM systems. The facility, located just outside Victoria, comprises 44,000 square feet of manufacturing space that can readily be expanded. . . . "
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SDL is among the most experienced fiber optics suppliers in the industry. Long before telecommunications became a hot target market, SDL was selling to military and aerospace industries. They have a proven record of successfully designing and bringing new facilities on line and yet it took them a year from announcement to completion.
AVNX could not have implemented much more than the original 54,000 sq. ft. at the time of your visit. The signing of the second lease came later. The SEC-424 doesn't pin-point the exact date but as of Feb. 4, 2000 they had exercised the option on the second building. Again, neither of these spaces is solely for manufacturing. And they could not have been fully operational at the time of your visit.
Based on all the information I have to date, I believe your description of Avanex's manufacturing capability was exaggerated by at least a factor of three.
To refresh your memory, your exact words were:
"However hard it may be to focus in the midst of downward flight, I suggest that you steer your parachute toward its polychrome photonic trampoline, deployed in two buildings with close to 150,000 square feet of manufacturing space at Encyclopedia Center."
I really don't know how many of the 450 total workers were fully trained, but I saw hundreds laboring hard through the night I was there.
I will leave the 450 workers to your imagination. I suspect they materialized in much the same way the 150,000 sq. ft. did.
It's called the Gilder Touch.
Pat |
