G'day for optical components: Nortel finds a mate in Photonic Technologies

Nortel Networks can't seem to keep its hands out of the component cookie jar. Last week the company acquired Photonic Technologies, an Australian maker of components that enhance dense wave division multiplexing and high-speed optical networks. Valued at $35.5 million, the purchase gives Nortel two key components to extending light to greater distances with less dispersion.

As carriers begin to migrate from 10 Gb/s DWDM and high-speed optical systems to 40 and 80 Gb/s systems, Photonic's circulators and dynamic gain flattening filters will accelerate the development and adoption of the high-speed systems.

"As systems become longer reaching and higher capacity, we have to control dispersion and the non-linear kind of characteristics of the fiber more precisely than in the past," said Greg Mumford, president of the optical networks division for Nortel. "It's important to have dynamic gain management and power management in these systems."

Photonic's components will be important in further developing the capabilities of the ultra long-haul platform from Qtera, a company Nortel purchased in December, Mumford said.

"Circulators manage the polarization of light and the propagation of light through the fiber," he said. The circulator component and dynamic gain flattening filters will make it easier for the Qtera platform to transmit further. "As we go to 40 Gb/s and 80 Gb/s, these components allow us to get more performance out of very low and very high bit-rate systems," Mumford said.

The new components likely will help enhance Nortel's OPTera long-haul platform and its OC-192 DWDM system, said Scott Clavenna, principal analyst for Pioneer Consulting. Currently, circulators are in "extraordinary short supply," he said. "There is a 12- to 18-month waiting period for key components from companies such as JDS Uniphase and E-TEK Dynamics."

For Nortel to maintain its lead with DWDM systems, it needs faster access to these components, Clavenna added.

Photonic will become part of Nortel's high-performance optical components solutions business unit, which addresses increased demand for optical components from manufacturers worldwide. Nortel's investment in Photonic will enable substantial growth in the development of optical components, said Ralph Betts, who will continue his role as managing director for Photonic after the purchase. Nortel has been part owner of the component maker since 1998, when it took a one-third stake in the company.

"This acquisition is the next logical step," Betts said.

In addition to Photonic, Nortel purchased both Xros, a developer of a pure photonic switching platform, and CoreTek, a producer of tunable lasers, in March. Although Photonic's circulators and dynamic gain flattening filters - used mainly for controlling the polarization of light inside DWDM networks - will not have a direct effect on the development of Xros' photonic switch, the Photonic and CoreTek components will become part of Nortel's vision for enabling the optical Internet, Mumford said.

The new business unit will provide components to Nortel and to other competing systems manufacturers, a common occurrence among component suppliers that simply need to fill their systems orders, Clavenna said.

"It's a very supply-constrained market right now," he said. "Competitors are selling to competitors pretty frequently." While some have speculated that Nortel's business unit would spin off into its own separate company, market demand and growth make it advantageous for Nortel to keep the unit in the company, Clavenna said.