All manufacturing processes, developed by Lynx are contracted out to third-party companies. Infineon, also a strategic investor, is the only contract manufacturer to be named publicly to date; agreements with a further three major manufacturing companies are in place. All intellectual property associated with outsourced manufacturing processes is owned by Lynx Photonic Networks. Michael Leigh was keen to point out that none of the company's funding has been devoted to the development of manufacturing facilities.

Mission

Lynx Photonic Networks was founded with aim of becoming the leading provider of intelligent photonic switching sub-systems to equipment vendors. Elaborating on this mission, Mr. Leigh noted that the market in which Lynx plays is nascent - there are no established players. The company feels that it has carried out more groundwork to initiate the adoption of photonic switching than any other company in the optical switching business, and therefore is in a position to become the leading player.

Lynx is specifically focused on the all-optical switching business and supplies subsystems - an integrated subsystem of components, often on a single optical chip, as opposed to individual components - for incorporation into system vendors' switching solutions. Mr. Leigh likened these subsystems to a key function printed circuit board within a PC.

Discussing the founding vision behind the company, Michael Leigh said, "Lynx Photonic Networks is based on the premise that, to date, all traffic transmitted along optical fibre must be converted to electronic form where the fibre terminates. One disadvantage of this is that between 60% and 100% of the traffic will not be destined for any particular node, and so will have to be converted back to photonic form once more for further transmission along the network. A parallel issue is the fact that electronic switching equipment is not scaleable, whereas optical equipment generally is. These factors have created a bottleneck in optical networks." Today's so-called "optical switches" are mostly O-E-O solutions and are data rate and format dependent.

Funding

The company has raised a total of $62 million in funding to date from investors including Morgan Stanley, Goldman Sachs, ADC Telecommunications, Telesoft Partners, and Harborvest and Walden. This investment is projected to be sufficient to fund Lynx into 2004 in the 'worst case' scenario, which excludes any revenue generated.

Mr. Leigh added that even the relatively established system vendors, outside of the major players - the 'inbetweeners' - struggle to make an impact with these customers. Today, despite experiencing extremely tough times, the major systems vendors are beginning to emerge from their darkest days.

Commenting on the strategy of the major system vendors, Mr. Leigh said that these companies are now focused on creating systems solutions for the major carriers - their prime customers. A by-product of this strategy is that, increasingly, these system vendors are demanding subsystems, rather than simply components, from their suppliers. By following this strategy, the system vendors gain benefits in terms of speed to market with new products, whilst also maintaining focus on their core strengths - system engineering, integration, applications, management and support capabilities.

"Ultimately, the major vendors are the only companies who have the budget and capabilities to produce, market, certify and support solutions to the large carriers."

Mr. Leigh was asked whether there was concern from customers associated with single-sourcing, potentially heightened by the fact that no other company is currently shipping switching subsystem devices based on Planar Lightwave Circuit (PLC) technology as employed by Lynx. He responded that this is not considered a threat to the success of company, as the issue was addressed from day one, specifically by the signing of agreements with four major contract manufacturing companies. Mr. Leigh added that, under non-disclosure agreements with its customers, Lynx Photonic Networks has successfully tackled any problems in this area.

Standard 8x8 matrices are in commercial production in the form of the Photon.8x8 PCSS device, featuring built in VOAs plus the multi-cast and broadcast capabilities. The company can also produce 1x2 and 2x2 devices integrated with intelligent optical performance monitoring for OADM and protection switch applications for custom product offerings. A Photon.16x16 PCSS product has been developed, and is currently undergoing evaluation prior to commercial launch.

Describing the company's activities, Mr. Leigh said that development of customised solutions, tailored to the requirements of individual customers, based on a range of Lynx standard building blocks, forms a significant portion of the work. These projects will typically entail integration of a number of functionalities into a single monolithic device. The integration of several functions onto a single optical chip is a feature of Lynx Photonic Networks' PLC technology.

In terms of design and production, Mr. Leigh noted that the materials and techniques employed are mostly standard: the wafers are silicon and glass (silica) and waveguides are etched into the silicon substrate. These methods are seen as the best compromise in terms of mass production and coupling of elements to native forms. He added that there are numerous PLC components available on the market, being typically utilised in attenuators, couplers and arrayed-waveguides (AWGs). However, efforts to commercialise this technology for switches has so far been limited in scale. Lynx Photonic Networks is the first company to successfully develop these devices, with the manufacture of a commercial 8x8 switch featuring high performance capabilities.

Smart features

Lynx's products incorporate many 'smart' features, designed to ease set-up and operation by customers. An example is the ability for system developers to configure complex switching and energy management functions using natural language command sets. This feature was noted as a considerable improvement over first generation optical switches.

Illustrating this point, Mr. Leigh said, "The control plane will read 'connecting input port one to output port two' - the functionality underlying this command is performed automatically. With multi-casting, the command might read 'connecting input port one to output ports one, two and three'. In this situation, the signal would be evenly split or set according to the destination of each path, proportionate to the geographical distance of each node, for example, 10%, 20% and 70%. The switch will automatically adjust the power to each port as appropriate, to a granularity of one percent. Control programming can be set to respond to a variety of factors, such as time of day, alarm conditions or dynamically."

Optical switching

Describing the operation of the 8x8 device, Michael Leigh said that traffic can be 'dropped and continued' concurrently and signal strength selected, by use of the VOAs, noting that, currently, there is no other method available for dropping and continuing signals optically. The alternative is reversion to O-E-O signal conversion. Lynx Photonic Networks' devices feature VOA on all ports.

The company believes that for the immediate future switching in optical networks will involve a mix of optical and electronic techniques. Whilst 'through' traffic will travel across a node and continue along the network in optical form, the appropriate traffic will be dropped at a node, from where it can be either split into smaller 'chunks', for onward transmission optically, or converted to electrical form. At present, this process requires the use of large, expensive, switches, consuming a lot of power. As noted earlier, these switches are not scaleable.

Regarding the acceptance of Lynx Photonic Networks' products in the market, and, more generally, the move to all-optical switching, Mr. Leigh believes that the questions are now 'when and how' to make this transition rather than 'if'. He added, "The primary issues relating to optical switching today are: what technology is commercially viable and market ready, when to implement it, and what is the cheapest method of accomplishing it."

Reliability

Reliability has been a recurring theme with optical switching technologies to date, mainly as regards mechanical - moving-part - solutions. Lynx Photonic Networks' PLC technology is extremely reliable and robust, being akin to semiconductor devices. The company has conducted destruction testing of its products. Qualtech Laboratories has rigorously tested the devices - in temperatures ranging from minus 90 to plus 140 degrees centigrade, and at vibration levels up to 26g. Lynx Photonic Networks is the only optical switching technology to successfully complete such testing parameters. "Our devices have completed testing not only in laboratory conditions, but also in 'real' situations, on operational switches."

Distribution

Lynx distributes its products directly, due mainly to the necessity of a high degree of technical interaction between the company's applications team and OEM customers' systems designers. In some overseas markets the company does employ representatives, although not distributors.

Although sales cycles with large system vendors are longer than is the case with smaller vendors, the risks are generally lower. A large vendor will be selling its systems to more than one carrier - typically anywhere between one and twenty in number. Mr. Leigh pointed out that a single large carrier would be sufficient to support Lynx Photonic Networks. A normal sales cycle totals approximately eighteen months - comprising nine to twelve months of testing with the system vendor, followed by six months of carrier testing. Lynx has been engaged in this process with at least one vendor for around nine months, and therefore can expect to see deployment of its product into live networks by, at latest, fourth quarter 2002. Mr. Leigh remarked that 2003 promises to be a very good year.

With respect to timing, Michael Leigh noted that as little as two years ago, the technology utilised in Lynx's devices was not widely known or understood. Today, the systems vendors and carriers are familiar with the various technological options for photonic switching, and the capabilities of each. "Two years ago, if we tried to talk with companies about our technology we would get blank looks. Now, the vendors and carriers understand what we are offering, and how it compares to other available technologies."

Market size and development

Estimates for the value of the optical switching, and within it the PLC, market vary wildly. Mr. Leigh remarked, "I have seen a figure of $307 million for the optical switching equipment market in 2001, climbing to $6.4 billion by 2006. For the PLC market specifically, Electronicast quotes a figure of $173 million in 2001, forecast to reach $813 million by 2006. The North American market is expected to account for 50% of this total, with Europe and Asia-Pacific taking 20% and 30% respectively. At Lynx Photonic Networks, we anticipate that the optical switch market will reach $200 million in 2002, growing to approximately $1 billion within three to four years - growth will be exponential once this market takes off."

Initially, the optical switching market will encompass solutions incorporating photonic cards in what are otherwise conventional O-E-O systems, before an evolution to true all-optical switching. In support of the projected $200 million value for 2002, Michael Leigh said that systems making up this figure will be selling for between fifty thousand and several million dollars. In the wider context, Lynx expects that within five years all-optical switching products will account for at least half of the total switching equipment market for optical networks. This view is shared by an increasing number of industry observers.

Customers

The target market for Lynx Photonic Networks is, unsurprisingly, the large system vendors such as Lucent, Nortel, Alcatel, Cisco, Tellabs and major Asian systems manufacturers. The company is concentrating its sales effort on a basket of a dozen system vendors worldwide - a focus expected to hold for the next two to three years. Companies falling within this basket are estimated to account for approximately 80% of the equipment installed in the carrier space. Mr. Leigh commented that, despite this focus, several emerging companies have sampled Lynx Photonic Networks' products.

Challenges

Discussing challenges faced by the company, Mr. Leigh cited three factors currently impacting the market: carriers 'battening down the hatches' and holding off on investment in the current climate; the novelty aspect of all-optical switching, compounded by the negative industry view of the reliability of first generation systems; and alternative technologies - namely opto-mechanical, MEMS, liquid crystal and holographic solutions, in descending order of market presence.

"I view the three prime issues facing us as deriving from the market, rather than from competitors or alternate technologies. 1) The carriers basically over bought for around eighteen months they then simply stopped buying. 2) Optical switching is seen as 'a different way of doing it' as far as optical networks are concerned - there are no true all-optical solutions carrying live traffic on any wide scale in operation. 3) Bad publicity over certain industry carrier and vendor failures in this sector. I believe that the all-optical switching market is set to begin in earnest in 2002."

Mr. Leigh cited JDS Uniphase and OMM as notable players with substantial experience in the field of optical switching. To date, each is targeting a different segment of the market to that of Lynx and pursuing an alternative technological approach. In the case of OMM, Mr. Leigh noted that carriers remain wary of MEMS technology and, in general, the installation of systems containing moving parts. However, each of the rival technologies has strengths and weaknesses and is a collection of compromises. Lynx does not see any one technology making a clean sweep of the market, each viable solution having its own application.

Michael Leigh claimed that Lynx Photonic Networks is the only company presently shipping commercial PLC-based switching devices, and the only company now shipping 8x8 - if not 4x4 - and larger products. However, the company is not alone in this field, as NTT and Bell Labs have independently demonstrated that PLC switching devices can be successfully manufactured. Commenting on the reasons for the scarcity of devices based upon this technology, Mr. Leigh explained that the challenge for other companies attempting to achieve the same thing lies in overcoming the 'triple whammy' inherent to PLC technology - namely, poor cross-talk, high power consumption, and high insertion loss.

Lynx Photonic Networks has developed patented technologies and techniques that successfully address these shortcomings. Michael Leigh said that a team of twenty-two physicists devoted two years to basic research in order to conquer these problems. Having solved the technological issues, the company is now directing resources to the system-level management and integration aspects of the product.

In the wider context, the only real concern for Lynx is the market climate - whether the industry as a whole will recover by 2003 or 2004, or whether it will be much longer, perhaps 2010. In the unlikely case of the latter scenario, this is a bridge too far for any small start-up company. "Everybody will have lost interest long before this date."

Mr. Leigh is confident that a recovery will commence around late 2002 or early 2003, with 2003 proving a year of strong growth, particularly for the optical switching sector. As a proviso, He added that, despite his confidence, there are no guarantees of success.

On a positive note, Mr. Leigh believes that the factors driving a migration to all-optical switching are compelling. As regards Lynx Photonic Networks in particular, the merits of its PLC technology are viewed as eliminating any shortcomings of the technology itself. The Lynx solution is also seen as superior to any competing technologies on offer. In addition, Mr. Leigh added, "We are focused on the right customers, have agreements with world-class contract manufacturers, and have solid financing. These strengths must now be carefully managed and integrated. Regarding factors that are within our control, we are comfortable that we can be successful. The crucial factor that we cannot control remains the state of the market."