40 Gbps-Good for Headlines, Not so Much for Profit.

The optical communications community has been waiting for wide scale deployment of 40 Gbps transport systems for a decade. Now, with 40G on its third technology iteration, it?s not surprising the excitement is wearing off, and valuations of 40 Gbps module vendors are coming down. Recent acquisitions averaged only two times sales and near or below VC-invested capital:

-Stratalight was acquired by Opnext in January 2009 and valued at $170 million, on annual sales estimated at under $80 million.
-Cisco acquired CoreOptics in May 2010 for $99 million, on estimated annual sales of $50 million.
-Oclaro acquired Mintera in July 2010 for $12 million plus an additional amount based on Mintera's revenue over the next 18 months. If Mintera generates $70 million in revenue over the next 18 months, the maximum additional payment would be $20 million.
Even in the best-case scenario, with Mintera generating $70 million in sales over the next 18 months, the acquisition valuation of Mintera is well below annual revenues. Meanwhile, forecasts for 40 Gbps deployments remain as upbeat as ever, despite emergence of 100 Gbps technology that some expect will eclipse them.

August 2, 2011

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