Analyst says recovery has begun

November 8, 2001--EXCLUSIVE--Jeff Montgomery, chairman and founder of ElectroniCast, this week gave a shot in the arm to fiber optics with his assertion that the communications industry is currently in a recovery phase and that from now through 2002, equipment demand will increase, particularly on the regulated telco side.

Nov 8th, 2001

By Carolyn T. Mathas

November 8, 2001--Jeff Montgomery, chairman and founder of ElectroniCast, this week gave a shot in the arm to fiber optics with his assertion that the communications industry is currently in a recovery phase and that from now through 2002, equipment demand will increase, particularly on the regulated telco side.

Speaking at his firm's Advanced Photonics Conference in San Mateo, CA, Montgomery further stated that the cost of data transport is leveling, while revenues are expected to increase at a faster pace due to more subscribers. The investment community will begin to be drawn back in early next year, Montgomery added. Investment activity, however, will be aimed at the merger of synergistic, successful startups and the acquisition of in-betweens - with relatively little 2002 first-round investment dollars.

As to what can be expected beyond 2002 - several component categories are, according to Montgomery, likely to achieve major advancement over the next decade, tied to the evolution toward the "all-optical network."

VCSEL-based multichannel transceivers

Remotely, electronically controlled tunable/switchable

- Laser Diode

- Fiberoptic Filter

- Photonic Switch/Optomechanical, non-mechanical, semiconductor

- Optical Amplifier, Attenuator

Monolithic integration, active and passive; optoelectronic plus electronic

Packaging is expected to continue to be a major challenge and opportunity. Key to the achievement of forecasted performance advancements, cost reduction, and quantity increases will be package design that facilitates high-volume automated assembly and test.

Montgomery expects that startups will be significant in the technological advancement, performance, and availability of photonic components, and that a strong majority of the 150-200 existing startups in the space may make headway against dominant vendors. While startups have focused on the development and transition to production of next-generation photonics, mature vendors, over the past year especially, have concentrated on management functions, operational cost reduction, personnel reductions, and conversion from captive to outsourced production of components. Although progress has been made by these major vendors, overall, Montgomery states, they have lost ground to startups.

Naturally, there is a downside for startups as well. Montgomery further stated that those companies not meeting their 2000-2001 milestones are very unlikely to get further funding in 2002. Fortunately, he anticipates that many startups have the capability and capital to move through next year, and to achieve commercial viability without additional outside investment.

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