NeoPhotonics, a leading designer and manufacturer of photonic integrated circuit, or PIC, based modules and subsystems for bandwidth-intensive, high-speed communications networks, filed a prospectus with the Securities and Exchange Commission for an initial public offering (IPO) on April 15th. According to the filing, the company seeks to raise a maximum of $115 million.
According to the prospectus, the rapid growth of bandwidth-intensive content, including HD and 3D video, music, social networking, video conferencing and other multimedia, is driving the demand for high-bandwidth products. The demand for bandwidth capacity is further intensified by the proliferation of network-attached devices, such as smartphones, laptops, netbooks, PCs, e-readers, televisions and gaming devices, that are enabling consumers to access bandwidth-intensive content anytime and anywhere over fixed and wireless networks, including 3G, and increasingly, LTE networks.
NeoPhotonics’ products enable cost-effective, high-speed data transmission and efficient allocation of bandwidth over communications networks. NeoPhotonics has a broad portfolio of over 300 products, including high-speed products that enable data transmission at 10Gbps, 40Gbps and 100Gbps, agility products such as ROADMs that dynamically allocate bandwidth to adjust for volatile traffic patterns, and access products that provide high-bandwidth connections to more devices and people over fixed and wireless networks.
NeoPhotonics; innovative PIC technology utilizes proprietary design elements that provide optical functionality on a silicon chip. PIC devices integrate many more functional elements than discretely packaged components, enabling increased functionality in a small form factor while reducing packaging and interconnection costs. In addition, the cost advantages of PIC-based components are driven by the economics of semiconductor wafer mass manufacturing, where the marginal cost of producing an incremental chip is much less than that of a discrete component.
NeoPhotonics sells its products to the leading network equipment vendors globally, including ADVA AG Optical Networking Ltd., Alcatel-Lucent SA, Ciena Corporation (including its recent acquisition of Nortel’s Metro Ethernet Networks business), Cisco Systems, Inc., FiberHome Technologies Group, ECI Telecom Ltd., Telefonaktiebolaget LM Ericsson, Fujitsu Limited, Harmonic, Inc., Huawei Technologies Co., Ltd., Mitsubishi Electric Corporation, NEC Corporation, Nokia Siemens Networks B.V. and ZTE Corporation. NeoPhotonics refers to these companies as its Tier 1 customers. According to Infonetics Research, or Infonetics, an independent research firm, the top 12 optical network hardware vendors supplied over 90% of the worldwide market for optical network hardware in 2009. Each of these vendors is one of its Tier 1 customers. In 2009, NeoPhotonics had revenue of $155.1 million and a net loss of $6.8 million. NeoPhotonics has grown its revenue at a 45.1% compound annual growth rate, or CAGR, from 2005 to 2009 due to organic growth and acquisitions.
Network traffic is continuing to experience rapid growth driven primarily by bandwidth-intensive content, such as HD and 3D video, music, social networking, video conferencing and other multimedia. This growth is intensified by the proliferation of fixed and wireless network-attached devices, and the widespread and growing use of IP-based video, including user-generated video, IPTV, streaming web video, video conferencing and mobile video, enabled by 3G and increasingly by LTE networks. These factors have contributed to the growth in network traffic and placed significant strains on existing communications networks. According to Cisco’s Visual Networking Index, global IP-based traffic is expected to grow from 14.7 petabytes per month in 2009 to 55.6 petabytes per month in 2013, representing a 39.3% CAGR.
Service providers are increasingly moving beyond their traditional markets to deliver a broad suite of converged services, including voice, video, broadband and mobile offerings. As a result, competition has increased, placing pressure on revenues, driving consolidation and creating increasingly complex networks with multiple bottlenecks. Consequently, service providers are seeking solutions that improve profitability by utilizing scalable, low-cost, high-bandwidth network architectures that deploy increased bandwidth capacity closer to end users.
Optical networking has emerged as a key technology to support the increasing demand for bandwidth capacity due to its ability to provide the speed, agility and access required by service providers. The market for high-bandwidth solutions presents a compelling opportunity for optical technology providers. According to Infonetics, global optical network hardware revenue is projected to increase from $13.4 billion in 2009 to $16.7 billion in 2013.
NeoPhotonics’ IPO prospectus can be found here.