MRV Readies Wireless Optical IPO

Recent improvements and cost reductions have awakened the wireless optical technology sector, and companies like Optical Access, Canon, AirFiber (funded by Nortel), and TeraBeam are vying to lead the way. At this point, however, the technology is in the earliest stages of market acceptance, and investors should proceed very carefully.

By Richard McCaffery (TMF Gibson)
October 6, 2000

Just in case optical networking technology isn't complex enough, get ready for optical wireless, an elegant concept that could bring highspeed services right into consumers' homes at low cost.

The operative word here is concept, at least from a business point of view. (That should open the hate-mail floodgates.)

Optical networking and incubator company MRV Communications (Nasdaq: MRVC) said today it has filed to take its wireless optical subsidiary, Optical Access, public. It's unclear at this point how many shares it plans to sell or the expected price range, but the company expects to raise up to $108 million.

Atmospheric scintillation?
As detailed in a recent Forbes ASAP article, wireless optical technology was all the rage a few years ago since it promised to solve one of the telecommunications industry's most irksome questions: How to provide efficient, high speed services into consumers' homes without going broke deploying the network?

The "wireless" in "wireless optical" promised to solve part of the cost problem, but line-of-sight problems, the high cost of components, and servicing issues such as keeping the lasers aligned nevertheless waylaid emerging businesses.

New technology seems to have solved many of these problems and folks are excited again about wireless optical. Optical Access and privately held AirFiber, Canon, and TeraBeam are among the companies honing in on the space.

Optical Access' technology, like AirFiber's, is based on a mesh network, which basically means it's flexible and the end user can route the signal around any snags in the network, such as atmospheric scintillation (unsteadiness in the atmosphere caused by heated air currents), and rain or fog, which can block an airborne optical signal.

So, on the one hand, it sounds like a great idea. Two recent MRV acquisitions, Jolt and AstroTerra, should bolster Optical Access' R&D department and manufacturing facilities.

Danger, Will Robinson
Keep in mind wireless optical is an undeveloped field. Here are a few issues to consider about Optical Access. It's not rocket science, by the way. Most of this is spelled out in the company's prospectus.

  • Service carriers have their hands full at present implementing expensive technology upgrades into the home such as DSL and cable modem. Will Optical Access and its peers be able to sell them on another new technology?

  • There are limits to what wireless optical can achieve. Bad weather and line-of-site issues must still be taken into consideration.

  • Optical Access, which reports $10.9 million in pro forma sales this year, doesn't have any long-term contracts with customers.

  • Optical Access' revenues are growing fast, but roughly $3.8 million of this year's $10.9 million in sales went to MRV and its affiliates.

  • MRV has provided cash to fund Optical Access' operations. After the IPO, the honeymoon is over.

  • Optical Access is losing money, and doesn't expect to become profitable anytime in the near future.

    Your Turn:
    What are your thoughts about wireless optical? Post your thoughts on the MRV discussion board.

    Related Links:
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