- The Washington Times - Monday, March 26, 2001

Trellis Photonics Ltd. said last week it will build an $18 million manufacturing facility near its Columbia, Md., headquarters, reaffirming Howard County's status as the place to be for fiber optics and photonics companies.

The county is full of little-known companies that could be central to the effort to extend the reach and capacity of the ever-growing fiber optic network.

The amount of data transmitted over telecommunications networks has skyrocketed in recent years. Telephone companies like AT&T; Corp., Sprint and WorldCom and network companies like Williams Communications Inc. and Broadwing Inc. are relying more on optical networks because they carry voice and Internet traffic in the form of photons and accommodate more data than wires, which transmit data in the form of electrons.

Many of the photonics companies began springing up in Howard County in 1999 and 2000 and are concentrating efforts on making optical components intended to help optical networks run even faster.

"This is an optical Silicon Valley," says John J. Bradunas, chief operating officer of Codeon Corp., a nearly 2-year-old optical components designer and manufacturer.

Howard County's fiber optic and photonics companies employed an estimated 2,260 people in January, according to a survey by the Howard County Economic Development Authority. Another 1,300 people worked at Anne Arundel County companies, the agency said.

Many of those people work at Ciena Corp. which has 2,039 employees in Maryland out of a global work force of 3,193 and Corvis Corp., which has 1,458 workers globally. As small companies like Trellis expand in Maryland, the number of workers in the high-tech field will go even higher.

For now, most of the photonics companies in and around Howard County remain small and privately held.

And most still haven't made their products commercially available. Engineers, holed up in clean rooms that look like a cross between operating rooms and top-secret scientific labs, are continuing research and development of products.

But all the companies have plans to grow and be an integral part in the search for ways to move more video, voice and data along fiber optic networks.

Codeon, founded in 1999, announced in January it had moved into new headquarters in Columbia. The new headquarters will have a clean room a high-tech manufacturing space nearly devoid of dust with 10 assembly lines where workers could produce as many as 4,000 modulators a month, a component that regulates the speed of an optical signal.

Codeon has 120 employees now, and Chief Executive Robert H. Harvey estimates the privately held company will have 200 workers by the end of the year.

New home

In December, Britain-based Bookham Technology announced it will locate its North American headquarters in Columbia. The company was courted by other states along the East Coast.

Bookham, a 13-year-old company, decided to move to Howard County in part because it could take up residence in a facility Honeywell International Corp. once occupied. It's leasing the facility.

Bookham will produce silicon-based components for fiber optic networks at the new plant. Its Howard County work force numbers just 30 now, but that is expected to grow to 1,000 by the end of 2003.

Until the Trellis announcement last week, Bookham's decision to make Columbia its home was the county's latest economic development coup. Trellis said it plans to hire approximately 350 new employees to work at its Columbia plant, which is expected to open by January 2002 and will include office space, development labs and manufacturing equipment to support production.

Optical-components maker Trellis employs more than 150 people in the United States and Israel now.

Seneca Networks, a Rockville-based developer of optical networking equipment, is hiring more than 50 new employees and will have 120 workers within the next year.

There are two significant reasons the region has been so successful in attracting fiber optic and photonics companies Ciena and Corvis.

Ciena, based in Linthicum, Md., is a telecommunications equipment supplier that opened in 1992 to make dense wavelength division multiplexing equipment, technology that allows telephone companies to boost data capacity of a fiber optic network by running multiple light beams, rather than a single light beam, over a strand of fiber optic cable.

Corvis, founded in 1997 by David Huber who also founded Ciena but left after a dispute with management over the direction of the company also makes multiplexers and other equipment that support transmission of data on fiber optics over long distances.

The success of those two local companies is tied to the insatiable demand for bandwidth, which will cause the market for dense wavelength division multiplexing equipment to grow to $26 billion dollars by 2004 and $40 billion by 2005, according to RHK Inc., a San Francisco market research firm.

Corvis and Ciena both rely on suppliers.

"We can't produce everything," Ciena Chairman and Chief Executive Patrick H. Nettles says.

Whether Corvis and Ciena become the cash cows the photonics start-ups hope they will remains to be seen.

"We haven't made agreements with any of them," Mr. Nettles says.

But there is a clear attempt by the start-ups to establish a supplier relationship with Corvis and Ciena, Howard County Economic Development Authority Chief Executive Richard W. Story says.

And despite the raft of start-ups already open for business in the corridor from Washington to Baltimore, it's likely more will occupy the landscape because Howard County officials are actively recruiting photonics companies.

"This is really just the tip of the iceberg," Mr. Story says.

In addition, more start-ups are expected to appear because Corvis and Ciena could spawn new companies as eager employees venture out on their own. That's just what former Ciena engineers Henry Yaffe, a Baltimore native, and Frank Moody did in 1999 when they founded Yafo Networks Inc., which has offices in Hanover, Md., and in Columbia.

Former Ciena Chief Scientist Victor Mizrahi left last year to start optical components maker Semrock Inc., headquartered in New York.

Lucent Technologies Inc. also has spawned an area start-up.

Timothy Cahall came from the New Jersey-based telecommunications equipment maker that produces the high-capacity material used for telecommunications transmissions and competes directly with Ciena and Corvis to start Trellis in 1999.

Optical Capital Group, an incubator and venture fund in Columbia founded last year, also has boosted the number of photonics start-ups in the corridor. Optical Capital Group has raised $200 million and has invested in eight optical components companies in Columbia, President Max Straube says.

Three photonics companies already have graduated from Optical Capital Group's incubator, though Mr. Straube declines to name them.

No one decries the potential for increased competition caused by the proliferation of photonics companies in the Baltimore-Washington corridor.

Ciena had trouble trying to convince prospective employees to move here in the early and mid-1990s including Mr. Yaffe, who hesitated before moving here from Atlanta but now the clustering of fiber optics and photonics companies makes recruiting workers easier for all of them.

"Now you can pick and choose from any number of optical companies you want to work at. There's just a plethora of jobs in the region," Mr. Yaffe says.

It still comes as a surprise to some, despite the success of Corvis and Ciena, which expects to have $1.7 billion in revenue for the fiscal year ending Oct. 31.

"If you look around, it's not obvious that this should be an optical mecca, but if you shake the trees, you see that there is a bunch of talent," Mr. Straube says.

Potential red flags

Fiber optics and photonics companies have had little trouble finding eager venture capitalists willing to make massive investments in their start-ups to date.

Yafo has raised $40 million.

Trellis also has raised $40 million.

Codeon announced Feb. 6 that it raised $37 million, bringing the company's total amount of venture capital funding to $62 million.

But now, telecommunications firms that have invested heavily in equipment to support faster networks could be running out of cash and forced to cut back on spending. That could reduce venture capital investment.

Teligent Inc. is just one example. The Vienna, Va.-based carrier reported a loss last month of $270.7 million for the quarter ended Dec. 31.

"I think the premise was that [competitive local exchange carriers] would proliferate, spur competition and invest in fiber optic networks and equipment, but they are running out of money," says Jason Marcheck, broadband analyst at D.C.-based telecommunications research firm the Strategis Group.

Telecommunications companies like Lucent and Nortel Networks already have had to cut back. Lucent said in January it would trim its work force by 16,000. Nortel said last month it plans to cut 10,000 jobs.

Neither Corvis nor Ciena has been spared the carnage on the Nasdaq stock market. Ciena was down 56 percent last week from its Sept. 21 close of $114.25 a share, closing Wednesday at $50.69. Corvis was down 90 percent last week from its Sept. 21 close of $86.25 a share, closing last Wednesday at $8.37.

But fiber optics and photonics companies continue to search for ways to move data on fiber optic networks faster in the belief that carriers want more capacity and more efficient networks.

"One things that's driving this is impatience. People want to download data faster," Mr. Harvey says.

Currently available technology lets carriers move 10 billion bits of data per second along fiber optic networks. Researchers already are working on equipment that can transmit an eye-popping 40 billion bits of data a second.

It's a far cry from the standard dial-up speed of 56,000 bits of data per second consumers can download over wires. Even if venture capital funding for photonics companies does slow this year, a faster Internet still is on the horizon.


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