Follow the yellow brick road

April 1, 2000

Originally, I had planned to base this month's column on a press release that someone had sent to me regarding a former ostrich farm that has gotten into the fiber-optic-network construction business. Having sold its "ostrich assets" (in the words of the release) in 1998, the company has just announced a new name it feels is more indicative of its current direction.

Besides wondering if the release was on the level, I was curious about the transition from ostrich wrangling to cable laying. Does experience with exotic birds provide a competitive advantage when it comes to tackling the wildlife preservation issues that projects across the country have encountered? And why would an ostrich farmer go into the optical-networking construction business in the first place?

I have to admit that, as I write this, the answers to the first question remain a mystery to me. But having returned from this year's OFC just as this issue was on its way out the door, I do know why someone would be interested in jumping into fiber optics, even from the undoubtedly fulfilling work of raising ostriches. While you'll be reading next month about the technologies that caught our attention, the main topic of conversation in the hallways and exhibit aisles was the massive size of the show itself. Attendance was pegged at 17,000 and counting as the show closed, an increase of more than 50% over last year. The line to register on the first day of exhibits wound out the building, down the street, and into the next area code.

Mingling in these lines with the engineers who remain the target audience for the show were venture capitalists, bankers, and financial analysts by the hundreds. The entire industry, as represented on the exhibit floor, appeared awash in cash. Startups from around the world reported multimillion-dollar rounds of financing. More established companies with high market capitalization used their sudden wealth to acquire competitors or companies with useful technologies. Booths were bigger, more numerous, louder, more expensively appointed-and crowded.

As someone who has observed the industry for the past three years, it certainly seems to me that fiber optics has "arrived." But as I am as new to this arena as the young engineers eagerly recruited on the show floor, I began to wonder what the true industry veterans were thinking. Having been through a few boom and bust cycles, did these stalwart fiber-optic pioneers feel vindication? Or, cautioned by previous rides through profit and loss, were they concerned that the Wall Street roller coaster that had made stomachs queasy at Ciena only last year had expanded to a size large enough to carry an entire industry?

I am happy to report that the old hands with whom I spoke at the show were very optimistic. While some grumbled that you don't even have to make a product to earn millions of dollars today, in general they said that while some bumps were inevitable on the road forward, bandwidth demands show no sign of slowing. In fact, someone said that the "killer app" for fiber wasn't the Internet but something else that would only appear once abundant bandwidth reached enterprises and homes.

Having seen what happened with Ciena last year (and that company's stock is doing just fine right now, thank you), I still fear the herd mentality that has undoubtedly led some investors to flock toward the optical component and network field as the latest fad. Eventually, someone's IPO will fail. Another startup will alarm its backers by discovering that its revolutionary technology doesn't work so well. The big players paying multiple millions for young companies may decide they have enough new technologies in their portfolio for the time being. In short, the sun won't shine this brightly on everyone forever-and when clouds roll in, some investors will pull out their money and run to get out of the rain.

But the investment firms and venture capitalists that first recognized the promise of fiber optics will remain, because the demand for bandwidth will continue. The optical-communications industry may not always be the investment Oz that it is today, but we're definitely not in Kansas anymore.

Stephen M. Hardy
Editorial Director and Associate Publisher
[email protected]

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