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Technical Insight

Vitesse takes Versatile approach to modules (Fiber News)

Vitesse is to acquire Versatile Optical Networks, a one-year-old start-up that designs and manufactures optical and optoelectronic modules, for approximately 10 million Vitesse shares (worth some $220 million when the deal was announced in early June). The acquisition is in line with Vitesse s strategic view that component suppliers must become module suppliers in order to be successful as the fiber-optic market continues to evolve (see page 75). Versatile s products include 10 Gbit/s long-reach transponders, 8 8 all-optical switches, and transponder arrays. Vitesse expects the transaction to be completed by the end of September, and plans to begin shipments at the end of the year. "The Versatile acquisition brings us an excellent opto-mechanical design team with a highly desirable expertise base in manufacturing, automation, test and packaging," said Vitesse president and CEO Lou Tomasetta. "Combined with Vitesse s analog and physical layer ICs and emerging InP manufacturing capability, we will now be able to provide a complete component solution from the fiber to the back-plane." Tomasetta gave more details about the acquisition in his presentation at the recent CIBC World Markets annual Communications Food Chain conference. "We ve been talking about this space for about three years," he said. "It complements our expertise in physical layer components, which has been our core business. We will be able to provide literally all of the electronic components that will go into the various types of module." Versatile s products will use optical devices, such as lasers and InGaAs photodetectors, obtained from third-party suppliers, and Vitesse will continue to supply components to other module suppliers. The deal also fits with Vitesse s choice of InP technology for 40 Gbit/s components "One of the important motivations for this acquisition is that it will give us an immediate outlet for an optimized, 40 Gbit/s (OC-768) module using our internal indium phosphide technology," said Tomasetta. Vitesse s recently announced InP process is discussed on page 4. Tomasetta explained that modules will become the component that the OEMs purchase. "Customers are changing from buying components and building their own modules to buying the module as the component," he said. "Unless you are an active participant in the module business by that, I mean supplying the modules you ll find yourself squeezed by a number of the large players such as Agilent, JDS Uniphase, Agere and Infineon. These companies are already in the module business, and can supply most of the components that go into the modules, or have access to the technology to build the components." As the supply "food chain" continues to evolve, there will be important consequences for the revenue-generating capabilities of different suppliers. "In the recent past, ASPs were so high that everybody in the food chain could make 60, 70 or even 80% margins," said Tomasetta. "In a year or two, module suppliers will still be able to make high margins, but there won t be room for multiple layers of the food chain to make the same kind of margins they ve made in the past."
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