Interview Published March 18, 2004|
Michael Leigh, Lynx Photonic Networks
My profile today is of Lynx Photonic Networks (www.lynxpn.com). I talked to Michael Leigh is the President and Co-Founder of the Calabasas-based company. Lynx is in the optical networking business and also runs R&D operations in Israel.
BK: What does Lynx do, and what are your products and market?
ML: Lynx is the leading pure-play photonic communications solutions company, with its own patented, solid-state, ultra-reliable switching technology. These "optical switches on a chip" are delivered in modules, subsystems, and as the core of Lynx's LightLEADER(tm) series of plug-and-play all-optical switching systems.
BK: What kind of process and material is your technology based on, and what keeps other companies from developing similar technology?
ML: We use silica-on-silicon planar lightwave circuits, based on modified mach-zender interferometers (MZIs). Lynx has been awarded more than a dozen patents, with several more pending, on the switch element design, several architectures, and other aspects of the integrated products. Just the last five years' history shows that even when a competing company manages to prototype a similar product at the optical chip level, it has failed in the transition from a working prototype to a commercially-certified, volume-shippable product. Lynx has developed fault-tolerant designs that allow them to be manufactured in volume through dual-sourced, multi-billion dollar manufacturing partners, meeting ISO 9001-2000 quality standards (Lynx was certified in 2003). Lynx retains all the intellectual property. On top of the optical chips, Lynx has integrated sophisticated electronics and complex software to create multi-functional photonic communications systems (featuring switches, variable optical attenuators, dynamic taps, and photonic multicast/broadcast with dynamic signal allocation). No other company has produced similar capabilities commercially, and the barriers to entry are high.
BK: Who are your customers, and why are they using your products?
ML: Our customers are global telecommunications OEMs, large government and commercial system integrators, and - for our intelligent protection switches and optical test access systems - service providers directly.
BK: How big is the optical switch-on-a-chip market today, and how big do you expect this market to become in the future?
ML: Electronicast, CIR, and many other market research firms make a living out of such predictions and do a better job at it than we ever could. So, rather than quote their various numbers and how they divide them up, it is reasonable to state that Lynx believes that the market potential is very significant and could easily support two or three public companies focused in this area within the next three to five years. Lynx intends to be the market leader in this emerging space. It is also important to remember that Lynx is not a component company. We sell complete plug-and-play solutions (the LightLEADER 3000 Series product line) and intelligent subsystems (Photon.PCSS(tm)). Even when our switches are delivered to OEMs in module form, they are supplied with intelligent electronic drivers and control interface.
BK: It seems like optical switching companies have been dropping like flies since the telecom market imploded. How is Lynx different, and why have you survived so far?
ML: Lynx has best-of-breed solid-state (no moving parts) technology; a strong, customer-validated, applications focus; and prudent cash-burn management and strategic planning. Also, we sell to key customers in multiple early-stage markets and have a manufacturing outsourcing strategy that leverages a dual-sourced, world-class supply chain (Lynx has achieved ISO-9001-2000 certification), eliminating the need for capital-intensive foundry operations.
BK: I see you're venture backed. Where are you in terms of funding and profitability?
ML: We still have more than half of our $35 million last round (March 2001) in the bank and expect to turn cash-flow positive next year. All told, Lynx has raised more than $64 million from blue-chip private and corporate investors, such as ADC Telecommunications, Goldman Sachs, HarbourVest Partners, Infineon Ventures, Morgan Stanley, Telesoft, and Walden Ventures.
BK: You've got an extremely small burn rate given you last went out for funding in 2001. Has this been revenue growth or just judicious spending?
ML: A mix of the two. A cornerstone of our business strategy from day one has been to leverage our internal resources and preserve cash with the use of best-of-breed outsource manufacturing partners. We have also recently extended this philosophy to specialist indirect sales channels. We manage all these resources with a lean but terrific internal design, manufacturing process, sales and marketing team. Our products also represent excellent customer value as they address applications that facilitate both short- and long-term capital and operating expense savings in advanced communications networks, as well as addressing key strategic issues for government, homeland security and military networks. This has enabled a rapid sales expansion over the past nine months.
BK: Finally, what has been the biggest lesson you've learned over the last few years as you've managed to survive through the telecom meltdown?
ML: Focus, patience, and don't believe all that you read in the press when it comes to the plethora of "magical new products."