Ikanos reached an agreement to acquire Centillium’s DSL chipset assets for $12M. This is a shockingly low price and it sets a new valuation floor for telecom component revenue streams that most people in the industry, including us, viewed as annuity assets worth much more. It should also force investors to question whether company cash flows are being invested in new products that will generate superior returns.
The ongoing consolidation of DSL chip suppliers should create a positive structural effect on pricing and improve the overall health of the remaining players. Dave Burstein of DSL Prime fame points out that Broadcom (BRCM), Infineon (IFX), Conexant (CNXT), and Ikanos (IKAN) now account for 95% of DSL chipset market share. This is extremely positive.
The Japanese Ministry of Internal Affairs and Communications is a great source for data on Japanese communication infrastructure and usage. A recent document provides a state-of-the-network update and lays out the goals for the next 3 years.
The latest Linley Group report on Networking Silicon Market Share provides a breakout of PON FTTH silicon market share for the second year running.. It includes both market size and market share information for all Networking markets, including PON. The key takeaway is that Linley believes the market grew only 20% in dollar size, though I estimate deployments grew worldwide over 50% year over year. Such is life as a semiconductor vendor.
They shared the following data with me.
The excellent Linley Group discusses Cortina’s recent acquisition of Immenstar, (my coverage here) a maker of FTTH silicon. Cortina is rapidly making itself as a consolidator communication silicon companies and Linley speculates their next target might be a ‘small VDSL vendor’. That vendor would be Centillium (CTLM), though I feel it is a better match for suitors other than Cortina.
This acquisition is surprising. Cortina previously focused more on the core of the network and has either built or acquired products designed to enable the next generation of WAN equipment for carrier applications. Immenstar is tightly focused on fiber to the home chipsets, a much more access oriented application. I suspect that Cortina is looking to couple it’s carrier class ethernet solutions with Immenstar’s high density OLT solution. Still, it is not a pretty fit.
My five part FTTH in China series discussed the players, technology, and opportunity of FTTH in the worlds fastest growing economy. Teknovus, a private company I follow made an related announcement today. They’ve released the first GE-PON chip compliant with China Telecom’s (CHA) enhanced IEEE GE-PON 802.3ah standard.
OK, since I’ve been called out by Om Malik, I’m going to let rip with a stream-of-conciousness monologue on optical. No backspace key, no delete key, spelling corrections ex-post-facto. Here goes.
Centillium Communications (NASDAQ CTLM) has a troubled past and present but the market has mispriced even the most pessimistic scenarios at this point, short of accounting fraud. With proper investor activism this value could be extracted through consolidation, liquidation, or private turnaround scenarios.
This is part IV in a continuing series. Part III can be found here.
Enter the Dragon
China Telecom (CHA) recently assembled a very quiet, closed door session of suppliers in order to orchestrate implementation of several extensions to the IEEE 803.3ah GE-PON standard. This event has gone totally unreported in the press. Obviously, knowing which companies attended would be valuable- this is what I have been able to conclude.