Broadcom is entering the PON chip market and has secured design wins with a major tier-1 equipment vendor. While this is something predicted here, the timetable was sooner than expected. This will have a substantial impact on FTTH component and equipment suppliers as well as the carrier currently conducting lab trials with the device.
Vitesse provided a “State of the Company” update, most likely it’s last ad-hoc quarterly call as audited results are expected to be made available by next quarter. We analyze their core business trends, including discussions about Chinese GE-PON, an update on EDC/SFP+ 10GbE, and the impact of removing distributor incentives. While Vitesse is cheap when compared to peers the risk of an unanticipated short-term revenue decline poses an unseen risk.
PMC-Sierra reported revenue at the high end of guidance but what caught investors attention was higher than expected revenue guidance for Q208. Of particular interest to readers should be PMC’s comments on FTTH in China and Japan, which we expand upon based on our in-depth knowledge of the area.
This is a collection of notes and observations gathered during the LightReading Ethernet Conference that didn’t merit a standalone article. Unless noted, these conclusions were from conversations I had while at the conference, and not the opinions of presenters.
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.
After dropping hints in an earlier conference call (see Vitesse Q207 Conference Call Notes) Vitesse announced the sale of a portion of their storage products to Maxim (MXIM). The $63M transaction has a provision for an additional $12M if certain milestones are hit. The company will use the proceeds from Maxim and $30M in new convertible debt to repay the junk debt to Tennenbaum Capital. (see Tennenbaum and Vitesse).
Three months ago I expected the sale of the entire storage unit to fetch 3.5x revenue. Subsequent research and discussions led me to believe this estimate was inaccurate, something reflected in comments I made (see here).
There is an excellent editorial today by Lee Goldberg that explores the lack of new R&D in SONET/SDH and PDH chip sets. While I don’t agree with the conclusion it is a worthy topic of exploration and he highlights something missed by the mainstream tech media.
The networking industry may be about to hit a hidden speed bump as the number of semiconductor companies actively involved with developing products to support SONET/SDH, PDH, and other TDM-based technologies can now be counted on one hand.
Lee thinks this is a big problem. This is not a problem at all. It is the only logical solution to the madness of the past 6 years.
Here’s a quick snapshot of the PMC-Sierra (PMCS) FQ207 conference call.
In a trend I expect to snowball, PMC-Sierra (PMCS) announced they will begin using sell-through accounting as opposed to sell-in accounting with distributors. This is a trend which traces it’s origins back to the accounting issues at Vitesse Semiconductor (VTSS.PK). (see “The Trickle Down Economics of Channel Stuffing“)