Optical networking startup Calient has received $225 million in funding.
Optical networking firm Calient Networks yesterday announced it has attracted third-round venture capital funding totaling $225 million ($195 million in cash and $30 million in lease commitments), including investments by major optical firms such as Juniper Networks, Marconi, ONI Systems and Tellabs. Calient has not yet commercially released any products.
It is no surprise that despite the current pessimism towards technology stocks, Calient was able to raise this money. Unlike many technology areas, optical networking has serious growth prospects. This is because the latest optical networking products improve speed and flexibility in data transmission, offering an enormous competitive advantage for telcos. At the same time, designing and building optical components takes enormous amounts of skill and investment.
Calient’s growth prospects are particularly good. Networks transmit signals using light. However, at the moment the switches routing the signals through the network to the correct geographical location have to be electrical. This makes the process slower and more expensive. Calient makes all-optical switches, allowing IP routing to take place within the optical layer. ‘Intelligent networks’, whereby the optical part of the system can talk fully to the IP part, are seen as the future of networking. They will allow many more network applications, and let telcos make major changes to the system in a matter of minutes rather than weeks. Calient’s technology is likely to bring this goal nearer.
In the optical networking industry, the major players generally buy out startups with promising technologies long before they reach profit, because of the huge competitive advantage that innovative technology brings. Companies such as Cisco and Nortel huge portfolios of products in almost every area of the network infrastructure market and need to ensure they have no product gaps. Promising independents with only one product can rarely hold out against such acquisitive rivals.
Calient’s technology has a bright future. Its shareholders have a good chance of making large returns. However, Calient itself is unlikely to last long as an independent company. It is likely that one of its major shareholders – quite possibly Juniper, whose CEO is on the Calient board – will take the company over.
