Spinoff from Lucent: Aralight

Spinoff from Sarnoff: Princeton Lightwave

Velio: Switches At Optical Speed

Corrections or additions?

These articles by Barbara Fox and Kathleen McGinn Spring were

prepared for the May 9, 2001 edition of U.S. 1 Newspaper. All rights

reserved.

NJ: Hot Telecom Territory

From the time that Ma Bell presided with matriarchal

splendor in the telecommunications industry, New Jersey has been a

leader in telecom technology. The telephone system worldwide is the

most complicated machine in the world and most of those systems have

been engineered right here. Even after deregulation — perhaps

especially after deregulation — scientists here are making

important,

exciting discoveries in the new research areas, and not all of these

work is being done at AT&T or Lucent Technologies or even Sarnoff.

Many small, exciting companies have sprung up.

"As a result of AT&T and Lucent and Sarnoff, this area is a hotbed

for optical device companies," says Joe Montemarano, industrial

liaison for the Princeton University Center for Photonics and

Optoelectronic

Materials (POEM). "The people who actually make fiber

optics

tend to be a few very large companies like Corning and Lucent, but

for every big company there are half dozen little companies all

working

on a slightly different piece of the action."

The profit curve can only go up, because fiber optics is such a very

young industry, says Mark Itzler, chief technology officer of JDS

Uniphase’s Epitaxx division. He takes this view even though his own

company had to trim its workforce in West Trenton. "Five years

ago," says Itzler, "there was negligible revenue in this area,

comparable to what it is now, and what it will be."

Whether they are making chips, or switches, or converters, or

monitors,

or modulators, or measuring devices, or repair kits, these mostly

new, mostly small companies are coming up with next-generation fiber

optic components. In addition to spin-out support from the Lucents

and the Sarnoffs, they get lots of R&D support from Princeton

University.

Unlike Rutgers, which focuses on basic research in fiber optics,

Princeton

researchers work on devices for optical signal switching (such as

modulators) and for signal detection (such as receivers).

"New Jersey is strong in telecommunications because of the AT&T

legacy. Now POEM, Sarnoff, and the abundance of other companies doing

the same kind of thing provide our technology base," says Roy

Howard, applications engineer at Discovery Semiconductors on

Princeton-Hightstown

Road. "We all work on the same problem. Everybody looks at from

a different perspective and solves a piece of it."

"We’re talking about enabling broadband," says Tom Lento of

Sarnoff. "All these companies are working in areas that will

enable

the network to carry far more data than it ever has been able to do

before."

First, let’s define terms, starting with fiber, the term often

used by real estate brokers to lure companies to certain office parks

("Great fiber! Redundant loops!") by promising them fast Internet

connections. Data and voice message travel faster on fiber, because

it travels at the speed of light, as a light signal, in packets of

1s (where the light is bright) and 0s (where the light is dim). On

copper wire, the messages are sent with an electric current.

Scientists use the term fiber optics to describe the entire

field of carrying light with fiber and all the devices needed to

manipulate

that.

The term photonics is also about the technology of manipulating

light, but with a different connotation. If "electronics"

works with electrons to produce electrical impulses,

"photonics"

works with light to produce light waves.

Telephone companies are gradually replacing their copper wire with

fiber optic lines, but even messages sent on fiber must start as an

electrical impulse (in your handset or computer) and end as an

electric

impulse (in the receiver’s handset).

Converting electrons to photons and back again requires

optoelectronics,

and the conversion is done with lasers. Greg Olsen founded Epitaxx

(now JDS Uniphase) as Epitaxx Optoelectronics, for instance. Vladimir

Ban’s PD-LD and Olsen’s new company, Sensors Unlimited, for instance,

are doing the laser conversions.

What about wireless? Won’t that replace everything? No, because at

some point the wireless signal must be converted to some kind of wired

signal.

All this switching from wireless, to fiber, to copper wires, and back

again requires an endless assortment of switching and modulating and

monitoring devices. Princeton’s small telecommunications firms are

busily working on them.

Aralight, a spinoff of Lucent Technologies on

Cranbury-South

River Road, speeds up the switching connections that take place within

the telephone companies’ offices.

Princeton Lightwave, a Sarnoff spinoff now located on

Route 130, has laser and chip products that pack extra power to

increase

bandwidth for both long and medium distances.

Velio Communications, new at the Carnegie Center, does

optoelectronics with standard technology — CMOS semiconductor

chips made of silicon to send signals at optical speeds.

Qusion Technologies, which just moved from Canal Pointe

to its own 33,000-foot building on Black Horse Road in North

Brunswick,

wants to put many active and passive devices on the same chip, making

the optical equivalent of an integrated circuit.

JDS Uniphase/Epitaxx, the global company with a

manufacturing

operation in West Trenton, has fiber optic receivers (to detect the

data stream from any optic channel and convert it from light to

electricity)

and optical monitors (to regulate the flow of light on the network).

PD-LD, which recently expanded to Hopewell, works at the

other end of the network. Its current cash cow is packaging lasers

to convert electrical signals into light or optic streams, but it

is doing leading edge research for future work in networks with

photosensitive

glass (see page 15).

Sensors Unlimited, located at Princeton Service Center,

packs photo detectors into infrared cameras and has a new kind of

modulator to monitor the wave lengths of light on the optic networks

known as "dense wavelength division multiplexing systems

(DWDMs),"

those with different length signals on the same fiber.

The field of optical devices is so young, Itzler at JDS Uniphase

points out, that until a couple of months ago nobody had been through

a downturn. He is sanguine about the current company layoffs, a wave

that took 200 of the 1,000 workers at his West Trenton manufacturing

facilities, and compares it to a soft depression in what has been

until now an upward slope. "This is a sign that the industry is

maturing, and we have a great deal of optimism going into the

future."

Top Of Page
Spinoff from Lucent: Aralight

Unveiled in March as a venture from Lucent Technologies,

Aralight has a 75-patent portfolio from Bell Labs and a goodly number

of Lucent’s alumni. The company has switching devices that work at

50 bits per second but aims to create devices for "terabit"

systems that can transmit a trillion bits per second while using just

one-tenth of the power that today’s much slower optoelectronic systems

use.

Right now, it targets switches that are located in telephone company

central offices. "We have demonstrated aggregate band widths of

50 bits per second," says Gary Ger, vice president for business

development at Aralight. "This technology is now being used for

switching, moving information from one box to another, but it can

and will be used for transmission applications."

Unlike the much smaller Sarnoff, Lucent makes it a standard practice

to populate new ventures with the same scientists that were working

on that technology in the lab, says Steve Socolof, vice president

of Lucent Technologies New Ventures Group. He was a consultant at

Booz Allen before joining AT&T and the Lucent ventures group, and

he has degrees in math, computer science, and economics from Stanford,

Class of 1982, and an MBA from Dartmouth’s Tuck. His group was the

leader in a $10 million first round of funding, which was joined by

Ridgewood Capital, Signal Lake Ventures, and Solar Venture Partners.

Socolof explains the Lucent strategy. Five years ago, when Lucent

became an independent company, it began to create new ways to bring

technologies to market. "The success of a business based on

commercializing

technology has something to do with the commitment of people seeing

it through to product delivery," says Socolof. "Instead of

trying to retain them we actually encourage them to go with the

venture.

We want to work with an entrepreneurial team. Our goal is not

to flow compensation back into the labs."

"Conversely, if we see an opportunity to create a venture and

we find a set of people who like being in the labs, that is

a deterrent for us to move forward." Yes, this policy does incur

the cost of losing good researchers. "But that kind of culture

and movement and replenishment of people is a good thing, culturally,

for the lab. And out of 20,000 people we are not talking about a lot

of ventures."

Three of Aralight’s co-founders are indeed Lucent alumni: Ashok

Krishnamoorthy,

Keith Goossen, and Ger. Krishnamoorthy, the chief technology officer,

is an electrical engineer from the California Institute of Technology,

and has graduate degrees from the University of Southern California

and the University of California, San Diego. Goossen, the chief

scientist,

is an electrical engineer from the University of California at Santa

Barbara with a PhD from Princeton. Ger is an electrical engineer from

Drexel who has an MBA from Northwestern’s Kellogg.

Michael Camp, former CEO of Aralight, has moved on but retains a board

position.

Socolof also tells how Lucent has tried to give its ventures a good

start with a good patent position. Aralight, for instance, has patents

in such areas as microbump flip-chip bonded VCSEL design, array

optoelectronics

device design, high-speed transceiver arrays, III-V semiconductor

processing, 850nm photodiode design, and VLSI design of low-power

receiver/driver and switching circuits. "People trust what comes

out of Bell Labs is good stuff," he says.

"Besides technical credibility," he says, "it is nice to be

friends with Lucent. It has been demonstrated time and time again

that some sense of the Lucent name might open doors for partners or

customers."

But investors need to know that the parent will continue to take a

benevolent attitude and not set up future competition with its

progeny.

"Lucent is a big company with strategic intent of its own, but

we have spent years educating the market to ensure that, for Lucent

spinoffs, the Lucent influence is aligned with any outside

investors,"

says Socolof.

Lucent typically does not transfer patents but provides

a broad background license with exclusivity in a particular field

of use, to affirm that Lucent wants this business to grow and prosper.

"People will never invest in a young company unless they believe

it has every thing it needs," says Socolof.

As a huge company that comes up with four patents a day, Lucent has

two kinds of discoveries that it might want to license to young

start-ups.

1. Basic and early stage technology discoveries that

obviously

don’t fit in with what Lucent is doing.

2. Discoveries that could fit into the strategic space

of Lucent but may not have exactly the right home in Lucent.

Aralight is an example of the latter. It targets within-the-box

and very short range applications, a particular market segment that

none of Lucent’s business was focused on. "We thought this would

do better outside, where the company can talk with the various

companies

who are on the leading edge," says Socolof.

The successful companies will be protocol independent. Optical, DSL,

ATM, frame relay, IP — all need different languages, Socolof

points

out. "Each is appropriate for certain parts of the communication

stream," says Socolof, "and with networks of networks, the

networks have to be able to talk with each other. Lucent is a good

vendor because we are able to work with all of them."

"Our challenge is to make Aralight a high volume manufacturing

company," says Ger. "We have tremendous opportunities in

storage

and massive parallel processing, but as a start-up, you have to focus

on a niche and execute properly. Down the line, as we generate

revenue,

we will enter other gigantic markets."

AraLight, 1095 Cranbury South River Road, Suite

3, Monroe Township 08831. Catherine Kopko, office manager.

609-409-3337;

fax, 609-409-3335. Home page: www.aralight.com

Top Of Page
Spinoff from Sarnoff: Princeton Lightwave

Princeton Lightwave Inc. is a start-up with an unusually

valuable portfolio — the exclusive rights to the Sarnoff

Corporation’s

key optoelectronic intellectual property for telecommunications. The

company also walked out of Sarnoff’s door on Fisher Place with an

unusual number of personnel. Sarnoff’s usual method for spinning off

companies is to give its researchers an equity stake in the new firm

but keep them at home working on more new projects.

"PLI had products from day one," explains Jim Keszenheimer,

Sarnoff’s director of business development for optoelectronics.

"It

was felt that the best way to maximize the company’s value was to

maintain continuity in personnel."

"I picked the group of people who would build the best foundation

for the new organization without hurting Sarnoff," says John

Connelly,

vice president of engineering. A graduate of Rutgers, Class of 1977,

he has a master’s in metallurgical engineering from Polytechnic

Institute

of New York. At Sarnoff he had been in charge of the laboratory that

commercialized not only telecommunications applications but also those

for medical diagnostics, power generation, and electronic sensing.

Other Sarnoff alumni here are Ray Menna, a crystal expert who is

director

of materials growth, and Dmitri Garbuzov, vice president of research;

he had done research at Princeton and Northwestern universities and

in the Soviet Union and is a winner of the Humboldt Award.

Two women left Sarnoff for Princeton Lightwave. Pamela York, vice

president of corporate development, was a pioneer in several kinds

of lasers and also led the effort to create a silicon and glass

microfluidic

chip for drug discovery and genomics. She helped build one of the

successful the Sarnoff spinoffs, Orchid BioSciences.

The director of new product introduction is Nancy Morris, who worked

at Laser Diode Inc. before coming to Sarnoff, where she led the

technology

transfer and product commercialization for one of Sarnoff’s venture

companies, Secure Products.

Greg Blonder, of Morgenthaler Ventures, moved in to be the acting

CEO after the departure of the chosen CEO, who had been plucked from

Nortel. Blonder has been chief technical advisor to AT&T and director

of materials and technology integration research at Bell Laboratories,

and he led Morganthaler’s investment in another Princeton firm,

Paytrust.

Also in last year’s $28 million first round of investment are Venrock

Associates and U.S. Venture Partners.

Princeton Lightwave uses its unique chip level design and integration

technology to come up with high-performance optical components for

advanced network applications. By integrating design with

manufacturing,

Princeton Lightwave hopes to create the materials and structures for

the next generation of optical subsystems — such products as power

pump modules, advanced source lasers and Broadband GainChips (BGCs)

— with production slated for later this year.

Last month PLI announced a breakthrough, achieving the 1-watt power

level from a single narrow-stripe pump laser chip, taking the market

leader position in that particular kind of high speed laser pump.

Using an indium phosphide platform, these pumps can push a pulse for

longer distances, leading to wider bandwidth at lower cost.

Additional power does not increase the speed; it increases the

distance

between amplifiers. "As light travels down the optical fiber the

signals weaken and need to be regenerated," Connelly explains.

"Each amplifier gives the signal strength. Lasers are used to

optically pump the fiber, which creates a signal for the

amplification."

PLI has amplifiers for both traditional transmission methods and the

more advanced Raman amplifiers, which allow for even broader, less

expensive bandwidth.

Connelly feels the Sarnoff alumni gleaned plenty of start-up knowledge

from working with early stage companies: "When you are dealing

with senior management, you get to see all the warts, and it doesn’t

take you long to see which ones are running properly."

Princeton Lightwave also has access to the continual feed of new

telecommunications

technology from the team at Sarnoff that works on next generation

products. "We are continuing to do development work on PLI’s

behalf,"

says Sarnoff’s Keszenheimer.

— Barbara Fox

Princeton Lightwave Inc., 2601 Route 130 South,

Cranbury 08512. Greg Blonder, acting CEO. 609-925-8100. Home page:

www.princetonlightwave.com

Top Of Page
Velio: Switches At Optical Speed

Velio Communications Inc. opened a design center in

the Princeton area for one reason, and one reason only: "Purely

to tap the manpower," says G. Ramamurty, chief system architect.

The semiconductor company, with headquarters in San Jose, California,

designs minute components for next generation optical telecom switches

and routers.

Unlike all the other companies in this lineup, Velio does

optoelectronics

with standard materials. It uses the more traditional technology —

standard CMOS semiconductor chips made of silicon — to send

signals

at optical speeds. "It is difficult to get CMOS running at optical

speeds, so people are going to other materials like indium phosphide,

but that is expensive and is not a mature technology. We can transmit

and switch at optical speeds using standard CMOS technology. There

is no risk," Ramamurty says. Velio’s switch fabric is being used

now in the backbone of optical networks.

The 120-person company is not alone in hunting for engineering talent

in New Jersey. "All the big California companies have started

design centers here," says Ramamurty, reeling off Motorola, Intel,

and Broadcom as examples. "Everyone has a presence here."

Velio moved into 10,000 square feet in 210 Carnegie Center in the

fall. These offices put the company near the carrier class equipment

manufacturers that are its customers. And while Ramamurty would not

name clients, its targets are companies like Nortel and Lucent. A

sales presence is not in the picture for Velio, however. All of the

company’s 12 Princeton employees are engineers, six of them Ph.D.s.

Ramamurty says the company expects to employ 40 to 60 engineers in

its new offices.

Velio is a start-up that has taken in $50 million of venture funding

from Sequoia Capital, IVP, Global Catalyst Partners, Capital Research

Group, and HarbourVest Partners. In addition to its new Princeton

offices, the company has design centers in Lowell, Massachusetts,

and Chapel Hill, North Carolina.

The telecommunications industry is now in a slump, but Ramamurty says

his company is not feeling the effects. Next generation communications

technology like that on which it is working is a necessity, he says,

and Wall Street is looking at products telecommunications companies

have in their pipelines to meet the need. "Traffic is

exploding,"

he says, using a highway analogy. "One way to cope is to make

roads broader, that is the way optical systems work." But

increasing

capacity is not enough, as any shore-bound traveler encountering a

toll booth on the Parkway on a summer Friday knows. "You need

efficient interchanges," he says.

Communication circuits get flooded with data, Ramamurty says, "and

you have to switch intelligently." The chip elements Velio

designs,

called "blocks," move massive amounts of data between circuit

cards on a backplane, the surface on which the cards are mounted.

"In each generation, we pack more and more," on the chips,

he says. "What occupied an entire cabinet, we now put on a single

chip." As the chips acquire more processing power, however, they

run faster and faster. This becomes a problem, because "they’re

not like autos that let all the emissions out." Velio addresses

the power issue by designing very low power consumption into its

chips.

The company is a "fabless" shop, meaning that it designs,

but does not manufacture, or fabricate. "If you take companies

like the old Lucent, they used to design and manufacture,"

Ramamurty

says. "Today that (manufacturing) in itself is a billion dollar

industry. It’s too expensive for everyone one to do their own."

Velio outsources manufacturing to companies that "have no idea

what we’re building." The company, which started to sell its first

family of products earlier this year, could file for an IPO in 2002,

Ramamurty says.

Ramamurty left NEC, where he had worked for nine years, to open

Velio’s

Princeton office. Asked why he cast his lot with the start-up, he

says, "for the same reason everyone else does — it’s exciting,

and the upside is high." After reflecting a moment, he adds,

"it’s

a chance to build something you always wanted to."

The son of a chemist and a homemaker, Ramamurty was born in India

and received his master’s degree in electronic communications

engineering

from the Indian Institute of Science in 1974. He holds a Ph.D. in

computer communications from the University of Aston in the United

Kingdom. In addition to NEC, he has worked for Indian Telephone

Industries

and for Bell Laboratories in Holmdel. His wife, Hema, a librarian,

worked at the West Windsor library until he started working for Velio,

and putting in longer hours. She now stays home with their two

children.

Despite the fact that he is heading up the growing, new office of

a technology start-up, Ramamurty says he works 50 to 60 hours a week,

a schedule that would be considered part time at some pre-IPO

companies.

"The important thing," he says, "is to work smart."

— Kathleen McGinn Spring

Velio Communications, 210 Carnegie Center, Fifth

Floor, Princeton 08540. G. Ramamurty, chief design architect.

609-419-9300;

fax, 609-419-9777. Home page: www.velio.com


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