+44 (0)24 7671 8970
More publications     •     Advertise with us     •     Contact us
 
Technical Insight

Vitesse execs feel your pain (Portfolio)

CEO Tomasetta takes a pay cut and speculates about life on the other side of the business cycle at the CIBC Conference. Marie Meyer reports.
Sick and tired of seeing corporate fat cats take home huge paychecks while the value of your investment in their company shrinks? Then Vitesse may be the company you are looking for. Speaking at the 2001 CIBC World Markets "Communications Food Chain" conference in New York City on June 10, Vitesse CEO Lou Tomasetta said that his company s belt-tightening program includes a 1025% salary reduction for all senior management. Vitesse also shed more than 10% of its workforce, with most of the losses coming from the manufacturing area. Revenues for Vitesse in the June quarter will be down compared to the $121 million reported for the March quarter (which was down from the $165 million reported for the December 2000 quarter). The communications components market is in a tailspin, and Vitesse is being dragged down like many others. But rather than dwell on that fact, Tomasetta offered some interesting observations about recovery. "For Vitesse, for this quarter and the next few quarters, new product introductions are essential, because that s basically how we get out of this inventory correction by introducing new products for slots that have no built-up inventory," he said. "We ve been through these cycles before, and after the correction is done, the product mix is very different from the product mix that the company or industry had six months before the correction occurred." Tomasetta went on to say that he believes that Vitesse has positioned itself as well as possible for the next cycle, "however painful it is to survive the current cycle". Part of that positioning strategy is the recent acquisition of Versatile Optical Networks, a supplier of OC-48 (2.5 Gbit/s) and OC-192 (10 Gbit/s) transponders and optical switches. "Substantial revenue shipments" are expected by the end of the year, although the acquisition is expected to have a negligible impact on the balance sheet until the end of 2002 (see ). More CMOS and InP in the future CMOS now accounts for about 24% of Vitesse s revenue, and Tomasetta predicted that it would grow to 5060% over the next few years, as the company continues to expand into the switch market. He used a railroad analogy to illustrate the choice of technology issues in this area. Of the three basic types of switches, only the cross-point switches are very high-speed devices, requiring GaAs (or SiGe). In Tomasetta s analogy, these switches function like a connection between two sections of a railroad track. The second type, time slot interchange SONET switches, typically run at 155 Mbit/s, and can therefore be done in CMOS. Their function can be compared to changing cars on a train. And, finally, at the edge of the network, are the highly complex, intelligent packaged switches, also done in CMOS. These, Tomasetta said, can be compared to moving the freight around inside a boxcar. He also noted that the opportunities provided by the switch market will allow Vitesse to expand the size of the markets they address from just under $5B today to more than $13B in 2005. InP will also play a role in Vitesse s future and it is becoming a major component of the company s proprietary technology portfolio (in contrast, the CMOS fabrication is outsourced). Tomasetta identified two advantages of this strategy. The first is access to new markets in the optical components area, such as integrated receivers, transmitters, transceivers and transponders. "Optics have moved from the essential core of the network five years ago out to the edges of the network today, and relatively soon will be in the short reach access equipment as well," he said. "This will enable us, particularly after the Versatile acquisition, to come to market with incredibly cost-effective, high-performance solutions, that will exploit our ability to integrate all of the optical components that one needs." He offered, as an example, the receive side of a transponder, where Vitesse would be able to supply the PIN detector, the transimpedence amplifier, plus the clock and data recovery chip and demultiplexer. "Today these components, at OC-192, probably cost $600 to $1200," Tomasetta said. "We believe we can manufacture these components, particularly when we integrate them, for probably less than $40 or $50. Put that into our own module, and we can capture almost all of the margin and be at a tremendous cost advantage relative to any of our competitors." The second advantage that Vitesse sees in InP is the ability to supply higher speed physical layer parts, such as multiplexers and demultiplexers, and laser drivers. He said that Vitesse plans to use InP for 40 Gbit/s circuits in the near future and 80 and 100 Gbit/s circuits in the future, contrasting its future prospects to those of SiGe, "which really doesn t have an expansion path beyond 40 Gbit/s". Vitesse is interested in 80100 Gbit/s circuits for Ethernet applications, perhaps within the next two or three years. Alcatel Optronics issues warning Earlier in this issue we discussed the wave of bad news that has broken over the North American telecom equipment companies. Not surprisingly, the impact is being felt in Europe as well. In early June Alcatel Optronics warned that its 2001 outlook was in need of revising. "Given Alcatel Optronics high exposure to the submarine market and the increased lack of visibility and potential delays in large projects, as well as inventory build-ups and forecasts being continuously pushed out in the US, we feel it necessary to revise our outlook," said CEO Jean-Christophe Giroux. "Given the current market conditions, we now foresee a 2025% top line growth for the full year 2001 with the operating margin coming in at 15%. For the [June] quarter we foresee sales down sequentially in the high single-digit range with a 15% operating margin." At the end of April, Alcatel Optronics predicted a 50% sales growth and an operating margin of 20% this year. SLI: is this the end at last? In early June, executives at Semiconductor Laser International (SLI) announced that the company was exploring the possibility of a bankruptcy filing in the face of rising credit obligations. The company s primary lender precipitated the crisis by demanding immediate payment on $1.7 million. SLI indicated that it may sue the bank for "unreasonably" withholding consent for one or more of SLI s bail-out proposals. SLI stock, which is now traded on the over-the-counter markets, has fallen from its high of $10.50 in May 1996 to around 5 cents. In its five-year history the company has never generated any significant revenues, has never had a profitable quarter, and has generated a cumulative loss of more than $20 million. The company has failed to make any filings with the SEC since December. SLI and its CEO, Geoffrey Burnham, are currently the subject of an SEC investigation for possible violations of federal securities laws. Bede sales up 157% On June 14, X-ray equipment maker Bede announced that sales grew 157% in the March quarter, reaching 1.16 million ($1.63 million). The company recorded a loss of 100 000 ($141 000) for the quarter, compared with a loss of 390 000 ($550 000) for the same period last year. The revenue figure was slightly below the record levels achieved in the final quarter of 2000, but Bede s chairman Norman Price explained that "this is consistent with seasonal variations historically and in line with expectations given the lag between receiving the float [IPO] proceeds and applying these funds to increasing sales output to meet current demand." Bede s order book grew to 2.64 million ($3.72 million) at the end of March, an 82% improvement from the previous year, but up only 5% over the December quarter. Sales into the US market account for 45% of the total, and have grown by more than 180% in the past year (see ). Bede raised 17 million ($24 million) in its flotation on the London Stock Exchange in November. Part of the proceeds are being used to build a new 27 000 sq. ft facility in County Durham that will be completed in the final quarter of 2001. The company believes that additional manufacturing capacity is needed to keep up with rising demand; while output has tripled to 12 X-ray machines per quarter, its average delivery time has doubled to 16 weeks.
×
Search the news archive

To close this popup you can press escape or click the close icon.
×
  • 1st January 1970
  • 1st January 1970
  • 1st January 1970
  • 1st January 1970
  • View all news 22645 more articles
Logo
×
Register - Step 1

You may choose to subscribe to the Compound Semiconductor Magazine, the Compound Semiconductor Newsletter, or both. You may also request additional information if required, before submitting your application.


Please subscribe me to:

 

You chose the industry type of "Other"

Please enter the industry that you work in:
Please enter the industry that you work in: