New players have arrived on the scene to lead the optical rebirth that has accompanied the explosion in streaming video and wireless communications. The optical gear sector is shining brightly, and Oclaro (NASDAQ:OCLR) is one of the key Silicon Valley companies basking in the glow.
Following are excerpts from a recent Silicon Valley Blog interview with Oclaro CEO Alain Couder:
Q. Could you give an overview of what Oclaro is doing now and what plans you have for the near future?
A. Oclaro was created little more than a year ago when we merged two tier two companies, Avanex and Bookham. I joined Bookham three years ago. We did a turnaround. After that, it was clear that the industry needed to consolidate in such a way that we create a tier one player who could really drive the industry. We've had a successful first year with Oclaro. We are recognized as a tier one player. Together with Finisar, we are the two most profitable companies in the industry right now.
When you merge two companies of the same size, sometimes it works, sometimes it doesn't. We have been able to exceed the financial objectives that we had at the beginning. We are now on a growth path of 30-40 percent per year. We believe we can scale to become a $1 billion company in two years. We will do that through a combination of organic growth plus a few more acquisitions.
Since the Bookham/Avanex merger, we have done two very important acquisitions. We were missing the WSS technology, the optical switching technology. So we bought a company called Xtellus. Most recently, we bought Mintera, which was one of the leading start ups in 40G.
We are focused only on long haul and metro. Telecom is about 85 percent of our business.
Q. There was a glut of optical equipment before the tech bubble burst in 2000. What's different today?
A. There is no new major innovation. The thing which is different is that in the bubble time, there were all these new carriers coming in and ordering massive amounts of equipment that was not being deployed. Now the carriers are very cautious and they order only when they need it.
The optical industry needs to consolidate. There are still more than 200 companies in the industry. That's far too many. We probably need three or four large companies. Then you need a set of start ups, smaller companies that are acquired or go IPO.
Q. Can you talk about your revenue from your larger customers.
A. Huawei, Alcatel and Ciena, now Ciena/Nortel, control 50 percent of the market, what's called the DWDM market, which is where we are focused. Having our three top customers represent 35-40 percent of our revenue when their market share is 50 percent makes a lot of sense. We are not over invested in those customers. We used to be in the past. We had 30-40 percent of our business in Bookham with Nortel; Avanex had the same number with Alcatel. That was very risky.
Q. Describe the demand for video, voice and data over optical networks.
A. Video is the number one driver of demand for the core optical network -- more than 50 percent. The internet is second. Voice is a very tiny percent of the traffic. Response time, or latency, is another important factor that requires some extension of the optical network.
Q. How is the WSS and reconfigurable optical add-drop multiplexer (ROADM) technology evolving?
A. Optical switching is in its infancy, so its fairly static. Right now it is used more for configuration, reconfiguration. Over time, switching will become faster and I think your will find some dynamic switching. It's going to be a huge business. That is why we bought Xtellus!
Disclosure: Long FNSR