April 12, 2001, 4:34 PM — Theres no question that ONI Systems is making some noise in the optical networking market.
Early last month, the company blew out earnings expectations and increased future revenue guidance. A week later, ONI extended its product line, buying interface technology from Finisar Corp. and announcing software that will enable customers to provision their own optical circuits.
In short, the recently public company is ascending as some of its start-up peers are slipping and sliding. So just what's making this company tick?
For one, there's CEO Hugh Martin, an energetic talker and former Kleiner Perkins Caufield & Byers entrepreneur-in-residence who bounces around a glass-walled office framed with drawings of yachts. Martin's vision is a practical one targeted at extending the edge of optical networks to enterprise networks. He believes metropolitan optical technologies will open up new opportunities for corporations to use wavelengths for bandwidth-thirsty applications such as storage area networks. (Milking the SAN market is the trend du jour among optical networking vendors and VCs.)
"[Qwest Communications CEO] Joe Nacchio says the biggest opportunity is in delivering fiber to the enterprise," Martin says. "If all you're doing is fiber relief, it's not a big market."
Then there's the box. Metropolitan dense wave division multiplexing (DWDM) is a hot market, but there's certainly no shortage of players. What is it about ONI's approach that can separate it from the crowd? It's clear that the protection and provisioning features make ONI's DWDM system more interesting. In addition to offering plain vanilla DWDM channels, the nodes can be strung together in rings and offer protected channels with 50-millisecond restoration -- essential for the mission-critical telecom market. In other words, ONI delivers DWDM efficiency with SONET-like reliability.
But after digging deeper into ONI, the key to driving its next stage of growth may be the company's state-of-the-art manufacturing and testing system. As it matures and gets tied to Wall Street's brutal quarterly demands, manufacturing and inventory control will become the most important element of success.
That's where a Canadian, Alain Leclerc, fits in. Leclerc formerly worked at Nortel Networks, where he directed the manufacturing of the company's now-famous OC-192 line.
The defection of Nortel employees such as Leclerc is part of the ongoing legal battles between Nortel and ONI. From the looks of it, Nortel has reason to be concerned.