Interview with President and CEO Robert Lundy.
Glimmerglass, a privately held company based in Hayward, California, is a provider of intelligent optical switching solutions enabling the automated management of fibre infrastructure. The company supplies subsystems to equipment vendors and packaged solutions to network operators.
With its intelligent optical solutions, Glimmerglass is focused on three vertical market sectors: networking, government and defence, and test and measurement. Glimmerglass addresses customers using a direct sales force in the U.S. and via distribution partners internationally.
From subsystems to packaged solutions
Glimmerglass offers what it believes is the leading technology in transparent optical switching. Key to the company's solution is the MEMS-based 'Brilliance' optical switching technology, developed in-house, that powers its subsystem products.
Describing the company's offering, Robert Lundy stated that Glimmerglass provides truly transparent, pure light switching technology for Layer 1 applications that delivers loss of less than 2 dB, plus high sensitivity combined with high bandwidth. The product delivers bandwidth ranging from 10 Gbit/s to 40 Gbit/s across a highly configurable system scalable from 16 x 16 ports to 160 x 160 ports. According to Mr. Lundy,
"The beauty of optical switching is that it allows transparent transmission of traffic of any protocol and any format at any speed - in practical terms there are no caveats to this statement."
He explained that Glimmerglass started out as a supplier of subsystems to telecommunications equipment vendors; with the collapse of the telecommunications industry, and particularly over the past year, the company has transitioned to a provider of packaged solutions for automated fibre management applications. These packaged solutions, termed Intelligent Optical Solutions, are delivered to customers in the networking, federal and defence, and test and measurement market sectors.
Mr. Lundy noted there are very few companies currently offering transparent switching technology applicable to the markets that Glimmerglass addresses.
Applying MEMS technology
Discussing alternatives to MEMS technology for use in transparent switching systems, Mr. Lundy noted that while there are other options, none are presently suitable for the size of system that Glimmerglass offers. He cited Polatis and Continuum Photonics, who signed an agreement to merge in July 2005, as examples of vendors utilising alternative technology to provide low-end, non-scalable products capable of delivering only slow switching speeds. He added,
"I am not aware of any presently available alternative to MEMS technology for the applications that Glimmerglass serves. However, the market, and thus the potential reward, is sizeable enough to guarantee that companies are developing technologies to address it."
All intellectual property (IP) for technology on which the Glimmerglass solution is based, specifically the MEMS module, is owned by the company. The bulk of this relates to processes rather than physical elements. Mr. Lundy stressed, however, that the company's component suppliers deliver customised technology critical to the solution, even though these companies do not own the patents on Glimmerglass's technology.
Robert Lundy emphasised that Glimmerglass has been careful to dual-source components, noting that relationships were established with suppliers to ensure this before he joined the company in May 2005.
It was also noted that IP supporting the Brilliance technology at the heart of the Glimmerglass solution is wholly owned by the company and not licensed from outside.
Routes to market
Glimmerglass addresses the U.S. market via a direct sales force while in Europe and Asia distributors are used. Mr. Lundy remarked that Glimmerglass sells packaged solutions for customer applications. As such, it is essential to select appropriate distribution partners with similar capabilities - resellers supplying components are not generally appropriate.
As an example, Glimmerglass has formed a partnership with Bynet Data Communications in Israel, a solutions provider addressing government, defence, optical networking and test and measurement sectors. This is felt to be a perfect match within the vertical market sectors that Glimmerglass presently targets.
Robert Lundy emphasised that addressing international markets via distributors, rather than directly, does not present difficulties for a company such as Glimmerglass if suitably qualified partners are chosen. He added that a new distributor, with a team of 20 consultants accustomed to delivering sophisticated solutions, is due to be signed in September 2005.
Focusing on the opportunities
As noted, Glimmerglass currently concentrates on three vertical market sectors - networking, government and defence, and test and measurement. In 2004 Glimmerglass recognised that it would be necessary to expand its market focus beyond the telecommunications sector if it were to increase sales and grow.
Internet2, CERN, AMS-IX, the University of Illinois and the University of California at San Diego were cited as notable customers in the optical networking segment. Within the government and defence sector, the company counts a number of U.S. government agencies among its customer base, but a majority of customers cannot be named publicly. In this segment solutions are typically supplied for signal analysis, monitoring and security applications.
In the third key market, system test and measurement, Cisco and Sandvine plus U.S. RBOCs and large European and Asian companies, were identified as important customers.
Mr. Lundy stated that Glimmerglass has been cultivating a presence in these sectors for a considerable period of time, and the company is committed to serving customers within these markets, he added,
"Glimmerglass offers mid-sized systems, ranging from 16 x 16 ports to 160 x 160 ports, tailored to meet the needs of customers within the vertical market sectors that it addresses. The company is continuing to develop its products for such customers with the intent of strengthening and expanding its presence within these market sectors."
Robert Lundy acknowledged that Glimmerglass gained a reputation as a company serving 'technology-centric' customers such as CERN and Internet2, and until recently these would have been considered its core market.
However, Glimmerglass is now actively developing the commercial side of the business, particularly through the marketing of its solution for grid and dark fibre switching applications. This effort is in addition to successes in the government and defence sector. The contract win with Sandvine, announced in August 2005, was cited as an illustration of the effectiveness of this initiative.
The recent appointment of industry veteran Frank Dzubeck, president of consultancy firm Communications Network Architects, as an advisor to Glimmerglass, is further evidence of the company's commitment to building its presence in the commercial sector.
Regarding the telecommunications market - for which the company's products were originally designed - Mr. Lundy said that while this sector is not currently of key importance to Glimmerglass, the company has maintained relationships with the major equipment vendors and carriers with an eye to future opportunities. He highlighted the participation of NTT as an investor in a recently completed funding round as an illustration of this strategy.
In the future, Glimmerglass anticipates investment in new technology from the telecommunications sector, supported by a general industry recovery, deriving initially from companies in the Asia-Pacific region.
Defining the size of Glimmerglass' addressable market, Mr. Lundy stated that for 2005 this is estimated at approximately $600 million. He noted this is an internally generated figure, commenting,
"Glimmerglass does not target a sector that is scrutinised and dissected by numerous market analysts - the company is addressing a pre-emergent market."
During fiscal year 2004 the dominant vertical market sector for Glimmerglass, by revenue, was test and measurement. For the most recently completed quarter of 2005 the networking and government and defence sectors displayed markedly higher growth than test and measurement, although the company can still claim a number of multi-million dollar contracts from customers in the latter sector.
Given that automated fibre management is an emerging market with strong-growth opportunities attracting new investments, Mr. Lundy said Glimmerglass does recognize competitors,
"Continuum Photonics and Polatis could be considered competitors, but as noted previously these companies supply low-end systems. At the opposite end of the scale, Calient supplies high-capacity solutions offering some functionality comparable to the Glimmerglass' product. However none of these companies offers products directly tailored for the market sectors and applications that Glimmerglass addresses."
Mr. Lundy believes it is inevitable that the major equipment vendors will sooner or later turn their attention to the transparent switching market but such companies would find it necessary to source the core technology for such solutions from either Glimmerglass or one of a handful of vendors capable of delivering it.
With regard to factors hindering the adoption of all-optical switching systems, Mr. Lundy remarked that market awareness is now the prime issue. He noted that in the past, reliability of MEMS components had been of concern to carriers and equipment vendors, but does not see this as a significant deterrent today,
"Glimmerglass has in the order of one hundred and fifty systems deployed, some of which have been operational since 2002. To date there have been zero failures attributable to the core optical switching technology."
Robert Lundy said that certain market sectors have recognised the benefits offered by optical switching technology, specifically government and defence and, most recently, test and measurement,
"Customers within the test and measurement sector have realised that installing an agile optical switch at the centre of a test environment can deliver substantial economic benefits. In such an application the Glimmerglass solution delivers significant cost savings through allowing the customer to reconfigure the switch remotely and almost instantly."
Demand for ever-higher bandwidth is seen as the main factor encouraging the adoption of optical switching systems. As network operators and equipment vendors seek ways to increase network capacity, it is expected that more companies will assess and adopt transparent switching technologies. While the market is at an early stage of development, Glimmerglass does not believe there is any inherent technological limitation preventing its growth.
There is however one market sector that is not expected to adopt optical switching technology on a wide scale in the short to medium-term - that ironically being the telecommunication market for which the technology was originally intended.
During the late 1990s there was an assumption that service providers would implement all-optical switching systems in the core of their networks. Such a shift did not take place, Mr. Lundy noted, and following the downturn in the industry, carriers have had little or no interest in adopting new technologies.
This situation is forecast to change, however, as service providers identify a need for the provisioning of transparent circuits and wavelengths.
Customers and trials
Robert Lundy stated that what generally impresses customers about the Glimmerglass solution is not the technology per se but product reliability and ease of operation. He noted that a customer could plug the product into an Internet port, connect fibres and, aided by a new interface, have an operational system running on the network within fifteen minutes.
Glimmerglass now claims more than thirty customers in total, of whom roughly half are stated to represent repeat business. The company is also engaged, either directly or indirectly, in nine trials with customers, including some with telecommunication companies assessing the technology for possible future use.
Commenting on the trials, Mr. Lundy said that cycles vary but are typically completed within two weeks, though a short time ago the norm would have been two months. The trial period can, on occasion, be as short as a few days. This reduction in the trial period is attributed both to an increased awareness and confidence in the core switching technology and a more effective sales process on the part of Glimmerglass and its distributors.
Regarding equipment vendor customers, Mr. Lundy cited Lambda OpticalSystems as an important and long-standing customer. Glimmerglass also maintains informal relationships with equipment suppliers, such as for example PESA Switching Systems, a global supplier of routing switcher and distribution products, which was acquired by QuStream Corporation in December 2004. Such arrangements are considered a valuable additional route to market for Glimmerglass products.
Mr. Lundy emphasised that subsystems supplied to equipment vendor partners such as Lambda OpticalSystems are the 'standard' product, requiring no custom development work.
In the immediate future, Glimmerglass is planning multiple product releases as the company's solution is enhanced for key vertical markets. Longer term, the telecommunications sector is expected to become a significant market towards the end of the decade. Robert Lundy commented,
"Technology will continue to be the focus for Glimmerglass as it works to develop solutions delivering improved performance and increased features at lower prices - practically this comes down to an ongoing refinement of the product."
Beyond technology, Glimmerglass plans to open offices to support international markets. Mr. Lundy noted that currently the company has two staff based in Europe, the next step will be a full-time employee for the Asia-Pacific region followed by the opening of offices in both of those regions.
In conclusion, Robert Lundy stated that Glimmerglass projects it will reach break-even or profitability by the end of 2006. From that point onward the company aims to increase sales and continue its expansion to build a secure and recognised position as a supplier of intelligent optical switching solutions.