An Optical IPO, Really?

When the telecom bubble of the late 1990s popped, it took down with it the aspirations of hundreds of optical start-ups, not to mention billions of venture capital investment. And just when things couldn’t get any worse, an optical start-up, Infinera, was liberally funded by some of the savviest investors in Silicon Valley. The investors including optical rainmaker and former Kleiner Perkins Caufield and Byers general partner Vinod Khosla, played yet another hand, betting on the co-founders – Jagdeep Singh, Drew Perkins and David Welch.

The company has developed interesting technology that lowers the cost of fiber networks drastically. It has found buyers – from upstart carriers in Asia to large backbone providers such as Level 3 Communications. It has launched a new foray into the cable markets, and well, it has done what the three co-founders had promised to do when I wrote about them back in the (old) Red Herring.

Now, a news report in Telephony suggests that Infinera might be headed to the public markets. They are taking their cue from the appointment of a new chief financial officer, Duston Williams, who comes to Infinera from Maxtor, a company that recently merged with Seagate Technology. With nearly 400 employees, and $100 million (plus) in revenues, Infinera is a definite IPO candidate.

Still, it is hard to say if the markets are ready for an optical-only public offering. Technology IPOs (Vonage for instance) haven’t really performed well. Last week, Wintegra, a network processor maker pulled its IPO at the proverbial last minute, after the market showed luke warm interest in the company’s offering. Wintegra had $20 million in sales and about $194,000 in profit for the first quarter of 2006.

In light of that deal, there is a good chance Infinera team and their backers would wait a bit, and show some more growth and higher profitability. Infinera, and to some extent Force 10 Networks are two Silicon Valley start-ups that are doing well enough to reignite the demand for telecom/networking stocks. When that happens, is anyone’s guess!