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Publication: LIGHT READING
Date: 11th October 2002
Title: Transmode Makes a Little Go a Long Way

Transmode Systems AB has secured a third round of funding in what execs call a final push to meet a growing market demand for CWDM (coarse Wavelength Division Multiplexing (WDM) ).

Transmode, which shipped its first products in March 2001, has garnered US$8 million from two of its original investors, Amadeus Capital Partners and European Equity Partners (see Transmode Scores $8M ). The round brings Transmode's total funding to about $15 million.

That may seem a relatively small amount, but in Transmode's case, a little seems to go a long way. The company claims sales are up "just over 100 percent" since last year, and it has six customers -- two in the U.S., one in the U.K., and three in Scandinavia.

Moreover, Transmode is set to improve its products to tap what it sees as the widening spigot for CWDM. "This fully funds our business plan," says CEO Isaac Olasoko, who joined Transmode last April after serving in a number of management positions at Alcatel SA (NYSE: ALA; Paris: CGEP:PA) (see Transmode Appoints CEO ).

Olasoko says the round will go to upgrading the reach of the company's CWDM channels, using a technique Transmode demonstrated with amplifier maker Genoa Corp. in a U.K. field trial earlier this year (see CWDM On the Move and Transmode, Vtesse Trial CWDM ). In that demo, Transmode amplified four CWDM channels of gigabit Ethernet over 125 km of fiber (about 40 percent longer than present CWDM gear).

The improvement strengthens the pitch for Transmode, whose gear allows Sonet (Synchronous Optical NETwork) and SDH (Synchronous Digital Hierarchy) transmissions in metro networks to ride over CWDM in ring configurations. The support of rings, along with the box's ability to deal with distance impediments, are unique, the vendor claims. According to Transmode, most other DWDM gear costs more and doesn't support CWDM rings.

Olasoko says the upgrade levels the playing field between CWDM and DWDM. "The old barriers are eliminated," he argues, because Transmode's technique removes the distance limitation of 50 kms.

Transmode has marketing arrangements, he says, with OFS and Corning Inc. (NYSE: GLW), through which Transmode aims to sell its gear to customers buying those vendors' newer metro fibers, which are designed to reduce attenuation and work better with CWDM equipment.

Transmode concedes that it needs help in promoting CWDM. Not everyone agrees with the startup's view of the technology's benefits. Olasoko acknowledges that vendors of metro platforms based on DWDM (dense WDM), for instance, are digging in their heels: "They have some resistance, yes, they're trying to protect their DWDM products." But he believes that, as the old limits of CWDM are removed, their position will be harder to maintain.

Because the CWDM wavelengths can't be passed through to the DWDM grid, carriers often wind up managing two different types of WDM systems in the same metro, Clavenna says. The solution, he thinks, may come as suppliers find a way to offer "low-cost ITU grid DWDM in the access and regional metro networks." He says DWDM lasers and optics are falling in price, which may herald new products.

Another argument against CWDM is that it can't scale to handle large numbers of wavelengths, so it's not as "future-proof" as DWDM. This argument is used by Lumentis AB, which claims that it has ways of driving down DWDM costs to those of CWDM (see Lumentis Bursts Into 3G ).

But Transmode's undeterred. Olasoko says the proof is in the pudding: CWDM deployments are on the increase. One of Transmode's component suppliers, Tsunami Optics, is making money despite the current industry downturn, indicating growing demand, he says. And Transmode itself is continuing to grow. Olasoko's hoping to bring the company's tiny roster of staff from 35 to 45, many of whom will be sales folk.

Transmode also has its own challenges. Its customer roster so far remains fairly anonymous. Despite announcements of wins with Stealth Communications Inc. in the U.S. (see Swedes Cut Metro WDM Costs ), the U.K.'s Vtesse Networks (see Transmode, Vtesse Trial CWDM ), and Axis Communications AB in Sweden, there's little sign of traction with incumbent carriers. Clearly, it remains to be seen whether Transmode's latest funding can help enhance its position -- or that of the market for which it's set its cap.

Text: Mary Jander, Senior Editor, Light Reading

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