The consolidation and collapse of telecom OEMs and component suppliers seems so predetermined, it could have been scripted in advance. We predicted at year's end that the telecom hardware market at both system and chip level would go into freefall in midsummer, following the trajectory of e-commerce and alternative carrier companies.
Sure enough, no sooner did July begin than DWDM specialist Zaffire Inc. sought refuge in an unusual acquisition offer from Centerpoint Broadband Technologies Inc., an optical metro specialist pioneering subcarrier multiplexing methods. On the same day, Tachion Networks Inc. of New Jersey closed up shop, after failing to attract capital with a new name and business plan.
Attendees at the National Fiber Optics Engineers Conference in Baltimore agreed, through tight-lipped smiles, that this pruning was both inevitable and healthy, and that we could expect to see many more failures and mergers before the end of the third quarter. Given the number of lookalike optical access companies in the field, it will be easier for the few remaining carriers to keep the names of suppliers straight after the bloodletting of 2001.
The depressing point about the suddenness of this downturn is the amount of intellectual property that vanishes as either the investors in startups, or the acquirers of small companies that cannot be supported, decide to close up shop. Centillium Communications, for example, was working with Tachion on voice DSP projects that may go nowhere now that the company is defunct. Cisco Systems Inc. has set the standard for this behavior, halting operations as diverse as the Texas optical routing company Monterey Networks and the Canadian video-compression specialist PixStream. Sure, with a $2.5 billion write-down something had to give, but must we be so absolute in consigning promising technologies to the grave?
So this is a call to any large companies that may have cash left over: Late summer and early fall will be blue-light-special time. Startups with clever broadband access ideas will be seeking rescuers in shining armor-and the asking price is likely to be a fraction of amounts like the many billions that Nortel paid for Xros.
This might also be the time for bottom feeders to go rummaging through bankruptcy proceedings to acquire patent rights and prototypes on the fly, perhaps assembling an intellectual-property portfolio that becomes a dazzler again in two years, when the economy improves.
I don't like to encourage such leechlike behavior, but it's better than seeing so much technology die on the vine.
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