There is an optimistic sense of inevitability among investors that the optical network will transition from 10Gbs to 40Gbs. This inevitability is misplaced, as the rules that applied during the transition to 10Gbs no longer apply today. There is little technological, architectural, or economical reason for a widespread move to 40Gbs technology.
Ciena (CIEN) shares have been on a bit of a tear recently, rising 20% in June. Unfortunately we haven’t participated in this gain and I believe it is worth explaining the historical thinking behind this decision.
Infinera (INFN) had a very successful first day of trading after seven years of working counter to the popular and misguided beliefs of a Gilderesque all optical future.
Great controversy surrounds the company and investors wonder whether the valuation attached to company is justifiable. The valuation is indeed debatable and is predicated on their success penetrating the PTTs & Bellcos.
England is near the top of the list of countries I don’t like to visit. My wife likes watching the tedious Victorian England dramas of BBC “Masterpiece Theatre”. I last about 10 minutes until their images force memories of stuffy rooms, bad heating, weird ergonomics and truly god-awful food to resurface.
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.
On February 2, 2006, the day the Nortel/Huawei Joint Venture was announced, Google directed a search to this site with the following terms. My Web Stat software picked it up.
I guess I found the fact that someone from Nortel was trying to understand problems with the Huawei / 3COM venture after they had just completed one themselves was, ironic.
Now, it looks like the Joint Venture between Nortel and Huawei is over. It’s hard to say whether this is positive or negative, since so little was known about the intent in the first place.
From yesterdays 10-Q filing (Page 50):
On November 9, 2005, we and Huawei Technologies Co., Ltd. entered into a non-binding Memorandum of Understanding to establish a joint venture for developing ultra broadband access solutions. We and Huawei have now decided not to proceed with a joint venture,” reads the filing.
Hat Tip to Lightreading
Two things happened today. Ciena (CIEN) inked their contract with British Telecom for the BT’s 21CN project. And Marconi shareholders approved the sale of the company to Ericsson. Many readers know these two minor events have a bellwether common denominator – a willingness to meet the new price targets set by Chinese competition.
Just as Vietnam and Afghanistan were proxy wars for the 20th century superpowers, BT’s 21CN will be the first full-blown encounter between incumbent and Chinese research, customer service, accounting practices, and cost structures.
This is yet another example of technology research not keeping accurate score by focusing on the more traditional equipment vendors (Nortel, Alcatel, Lucent, Siemens, Fujitsu) and not counting the emerging Chinese vendors, particularly Huawei and ZTE. Huawei and ZTE both make wavelength switches and ship them in large amounts. Vitesse and Mindspeed supply the components at the heart of these switches and it is the Chinese vendors (and Nortel) who consume the most. Infinera’s not at the top of their list as a commercial partner though Mindspeed considers them a strong technical partner.
We don’t have a copy of the Del’Oro report, but it is an impossibility that ZTE and Huawei are not included in the top 5 vendors. We continue to see a lack of proper accounting for these vendors in carrier optical equipment and think the Nortels and Lucents of the world are radically underestimating the impact these companies will have at their core ILEC accounts. Just ask Marconi (uh… Ericsson) about Huawei and their experience bidding for the 21CN contract at BT.
Infinera is staffed by some very sharp ex-Lightera people, including a few of my ex-colleagues from Vitesse. They are certainly a company worth watching, particularly in an area that Om Malik fails to recognize- long reach, DWDM PON (warning, .pdf link), other than a throwaway reference to IPTV.